Dubai, May 21 (IANS) India has become the second biggest exporter to the United Arab Emirates (UAE) after China, following a sharp drop in the value of the US dollar-pegged local currency, the dirham. India has come to the second position for the first time after the creation of the UAE 37 years ago, the Emirates Business 24-7 newspaper reported, citing figures issued by the government-controlled Emirates Industrial Bank (EIB).

Stating that the UAE’s imports from India shot up seven times within five years, it said the value of Indian imports rose from 9.2 billion dirhams ($2.5 billion) in 2002 to 67 billion dirhams ($18.2 billion) in 2007.

According to the report, India accounted for around 16 percent of the UAE’s total imports of 418.7 billion dirhams ($114 billion) last year.

China’s exports to the UAE in 2007 stood at an all-time high of 69.9 billion dirhams ($19.03 billion), an increase of around 33.9 percent over the 52.2 billion dirhams ($14.2 billion) the previous year.

“India’s exports have steadily and rapidly grown over the past years,” the newspaper quoted the EIB report as stating.

“There are several factors for this increase, mainly the decline in the dirham against other currencies, mainly the UK pound and the euro by over 40 percent and because of the sharp fall in the US dollar, to which the dirham is pegged. This made imports from other countries, mainly Asian, more competitive,” it said.

The Gulf has been experiencing skyrocketing inflation in recent times as most of the currencies of the region are pegged to the plunging US greenback.

Another reason for India’s rise was that the European Union (EU) has been reluctant to sign a free trade pact (FTP) with the UAE and other Gulf Cooperation Council (GCC) members “at a time when there has been substantial progress in negotiations for such an agreement between the GCC, India and China”.

Last month, India’s Commerce Minister Kamal Nath, during a visit to Dubai, said that India expected to make substantial progress in its negotiations for an FTP with the GCC, which comprises the UAE, Saudi Arabia, Oman, Bahrain, Kuwait and Qatar.

India was also fast narrowing the gap with top-ranked China, the report stated, adding that the subcontinent would soon pose a serious threat to Beijing’s bid to maintain the top position.

The UAE’s total imports jumped by nearly 31 percent from 319.5 billion dirhams ($87.02 billion) to 418.7 billion ($114 billion) in 2007, making it the largest market in the Gulf beating Saudi Arabia.

“Given the rapid growth in the UAE economy and the resulting increase in domestic demand for goods and services, the country’s non-oil trade is projected to grow this year and further strengthen the UAE’s position as one of the world’s largest 30 countries in terms of commercial exchange,” the report said.