India has signed a trade pact with the United Arab Emirates (UAE) that will reduce import duties on the majority of Indian exports to the country.
The Comprehensive Economic Partnership Agreement (CEPA) is the first major trade deal signed by the Narendra Modi government since first coming to power in 2014.
The deal was signed in New Delhi by Commerce and Industry Minister Piyush Goyal and UAE’s Minister of Economy Abdulla bin Touq Al Marri.
While it cuts import duties on a wide range of products, the government expects it to especially boost the export of gems and jewellery, and apparels to the UAE and raise total trade up to $100 billion in the next 5-years.
India – UAE trade relations:
UAE is India’s third-largest trade partner globally, after the United States and China.
Bilateral trade between both nations stood at $43.3 billion as of 2020-21 and is spread across thousands of traded items.
In 2019-20, the pre-pandemic year, trade between the two countries was estimated at $59 billion.
The UAE is also home to 35 lakh Indian-origin persons.
The CEPA is expected to come into effect by the first week of May since the process will take about 60-days, Goyal said. During that time, a series of business interactions will be held across India, between businesses from both sides.
What deal includes:
The 880-page document covers topics such as free trade, digital economy, government procurement, strategic areas, Goyal said. Almost 90 percent of all traded items are set to benefit from the deal, he added.
For India, the deal is set to benefit exports from sectors such as Gems & jewellery, textiles, leather, footwear, sports goods, plastics, furniture, agri goods, pharma, medical devices, automobiles, engineering goods. “Most of these sectors are labour oriented and we do believe this will, as we grow our bilateral trade to $100 billion, open up at least 10 lakh jobs for youth,” Goyal said.
India has given tariff concessions on gold exports to the UAE, while they have eliminated tariffs on jewelry exports from India.
“In a first, the UAE has been gracious in accepting our request that once an Indian medical product is accepted by UK, US, EU, Canada, and Australia, and goes through the rigorous regulatory process of these countries, such products will get market access & regulatory approval in a time-bound manner of 90-days for being marketed in the UAE,” Goyal said.
He said that businesses of both countries will be protected from any sudden surges in volume of any product, through a permanent safeguard mechanism.
While it is currently engaged in discussing trade deals with as many as 8 nations, the deal with India has economic and strategic importance for the Emirates. “The projections are clear. It will add to 1.7 percent or $8.9 billion to our national GDP. It will raise exports by 1.5 percent,” Touq Al Mari said.
The UAE is expected to benefit from potentially larger exports of metals & minerals, petrochemicals, petroleum products and dates, Goyal said.
Top-level push
The deal found a major mention in the India-UAE virtual summit hosted by Prime Minister Narendra Modi and Deputy Supreme Commander of the United Arab Emirates (UAE) Armed Forces & Crown Prince of Abu Dhabi, Sheikh Mohamed bin Zayed al Nahyan, also held on Friday.
“I am confident this will begin a new age of economic cooperation and growth for both our nations,” Modi said.
Negotiations on the deal have been completed in a record time of just 88 days, having been officially launched in September 2021.
The latest deal is an ‘early harvest’ component of a far more comprehensive trade and economic partnership deal in the future. An early harvest trade deal is one in which both parties sign off on a set of relatively easily achievable deliverables.
Moneycontrol had reported earlier that negotiations were almost complete and Modi was set to inaugurate the pact during his planned visit to the UAE and Kuwait in early January.
What is free trade agreement:
A free trade agreement (FTA) or treaty is an agreement according to international law to form a free-trade area between the cooperating states.
There are two types of trade agreements – bilateral and multilateral.
Bilateral trade agreements occur when two countries agree to loosen trade restrictions between the two of them, generally to expand business opportunities.
Multilateral trade agreements are agreements among three or more countries, and are the most difficult to negotiate and agree.