- India and the United Arab Emirates (UAE)’ Comprehensive Economic Partnership Agreement (CEPA) was signed in 2022.
- CEPA covers goods, services and digital trade, among others, that will allow 90% of India’s exports a duty-free access to the Emirates.
- India and the UAE enjoy excellent bilateral relations, which are deep rooted and historical, sustained and nurtured by close cultural and civilizational affinities, frequent high-level political interactions, and vibrant people to people linkages.
- India and the UAE have been each other’s leading trading partners. From US$ 180 million per annum in the 1970s, India-UAE bilateral trade has steadily increased to US$ 60 billion in FY 2019-20 making the UAE, India’s third largest trading partner behind the US and China.
- The UAE is also the second largest export destination of India. It is also an important source of India’s energy supply and a key partner of India in the development of strategic petroleum reserves, upstream, and downstream petroleum sectors.
About the Pact
- The bilateral trade pact is India’s first in the region and the first comprehensive trade agreement with any country in a decade.
- The Agreement is a comprehensive agreement, which will cover Trade in Goods, Rules of Origin, Trade in Services, Technical Barriers to Trade (TBT), Sanitary and Phytosanitary (SPS) measures, Dispute Settlement, Movement of Natural Persons, Telecom, Customs Procedures, Pharmaceutical products, Government Procurement, IPR, Investment, Digital Trade and Cooperation in other Areas.
Salient Features of India-UAE CEPA
- CEPA provides for an institutional mechanism to encourage and improve trade between the two countries. The CEPA between India and the UAE covers almost all the tariff lines dealt in by India and the UAE.
- India will benefit from preferential market access provided by the UAE on over 97% of its tariff lines which account for 99% of Indian exports to the UAE in value terms, especially for all labour-intensive sectors such as Gems and Jewellery, Textiles, leather, footwear, etc. India will also be offering preferential access to the UAE on over 90% of its tariff lines.
- As regards trade in services, India has offered market access to the UAE in around 100 sub-sectors, while Indian service providers will have access to around 111 sub-sectors from broad service sectors such as ‘business services’, ‘communication services’, ‘educational services’, ‘tourism and travel related services’, ‘recreational cultural and sporting services’, etc.
- Both sides have also agreed to a separate Annex on Pharmaceuticals to facilitate access of Indian pharmaceuticals products, especially automatic registration and marketing authorisation in 90 days for products meeting specified criteria.
Goods excluded from the deal
- India has excluded certain goods from the agreement through a “sensitive list” of products amounting to 10 per cent of tariff lines that are excluded completely from the agreement.
- Dairy, fruits, vegetables, cereals, tea, coffee, sugar, food preparations, tobacco, toys, plastics, scrap of aluminium, and copper are among the products that are excluded from the pact. Certain other areas such as those that have seen sharp growth in domestic production or areas where the government is incentivising manufacturing through production-linked incentive schemes have also been excluded from the agreement.
- The government has emphasised that this agreement contains strict rules of origin provisions to prevent other countries from using the agreement to reroute their exports through UAE to benefit from lower tariffs.
- Most products require a value addition of 40 per cent in the exporting country under the new agreement to qualify for lower tariffs under the agreement.
- The agreement also has safeguard mechanisms that would be triggered if there was a significant surge in imports of a specific product in either country.
- The India-UAE CEPA will further cement the already deep, close and strategic relations between the two countries and will create new employment opportunities, raise living standards, and improve the general welfare of the peoples of the two countries.
- It is expected that the CEPA will lead to an increase in bilateral trade from the current $60 bn to $100 bn in the next 5 years and create lakhs of jobs in both countries.
- The agreement will also pave the way for India to enter the UAE’s strategic location, and have relatively easy access to the Africa market and its various trade partners which can help India to become a part of that supply chain especially in handlooms, handicrafts, textiles and pharma.
Why in News?
- During the past one year, CEPA has made a significant impact on India’s Bilateral Trade with the UAE and particularly India’s Exports to the UAE (Oil and Non-Oil).
- The Bilateral Trade between India and the UAE has touched historic highs during FY 2022-23.
- During the CEPA Implementation period (from May 22 to Mar 23), bilateral trade increased from US$ 67.5 billion (May 21-Mar 2022) to US$ 76.9 billion (May 22-Mar 2023) – an annual increase of 14%.
- Exports from India to the UAE have also registered a multiyear high. During April-March period, Indian exports to the UAE increased from US$ 28 bn to US$ 31.3 bn; an increase of around US$ 3.3 billion; or 11.8% year-on-year growth in percentage terms.
- Under the India-UAE CEPA in the Goods Domain, the UAE eliminated duties on 97.4% of its tariff lines corresponding to 99% of imports from India.
- India has obtained immediate duty elimination on over 80% of its tariff lines corresponding to 90% of India’s exports in value terms.
- In the Services Domain, broader and deeper commitments have been taken across all the sectors and modes of supply. Out of the 160 services subsectors, India has offered 100 sub-sectors to the UAE and the UAE has offered 111 sub-sectors to India.
- Given the significant increase in bilateral trade, particularly in exports of Indian goods and services, CEPA would have had a concomitant positive impact on other key macroeconomic variables such as GDP and Employment.