New Delhi: The Union Cabinet on Thursday approved an investment treaty with the United Arab Emirates (UAE) that is likely to significantly boost bilateral economic engagement in a range of areas, including manufacturing and foreign direct investment (FDI).

The approval for the signing and ratification of the ambitious investment treaty comes ahead of Prime Minister Narendra Modi's likely visit to the UAE this month.

The treaty is expected to improve the confidence of investors, especially large investors, resulting in an increase in foreign investments and overseas direct investment opportunities, the government said.

The pact may have a positive impact on employment generation, it said in a statement.

"The Union Cabinet chaired by Prime Minister Narendra Modi today has given its approval for signing and ratification of the bilateral investment treaty between the government of India and the government of the United Arab Emirates," it said.

"The approval is expected to increase investments in India and is likely to help in realizing the goal of Atmanirbhar Bharat by encouraging domestic manufacturing, reducing import dependence, increasing exports etc," it said.