Wednesday, 09 Oct, 2024
By: Yash Gupte
Under the India-UAE CEPA in the Goods Domain, the UAE eliminated duties on 97.4 percent of its tariff lines corresponding to 99 percent of imports from India. Image Source: IANS
It was also decided during the meeting to establish a number of committees, subcommittees, and technical councils to oversee the implementation of the trade agreement's various provisions, including those relating to goods trade, customs facilitation, rules of origin, sanitary and phytosanitary issues, technical trade barriers, trade remedies, investment facilitation, and economic cooperation.
A year after India and the UAE signed a significant free trade agreement, the two nations have decided to increase their trading goal for non-petroleum commodities to $100 billion by 2030. At the moment, it is $48 billion. Monday marked the end of the first meeting of the India-UAE Joint Committee on Comprehensive Economic Partnership Agreement (CEPA), which was presided over by India's Minister of Commerce and Industry Piyush Goyal and UAE Minister of State for Foreign Trade Thani bin Ahmed Al Zeyoudi.
Piyush Goyal, Minister of Commerce and Industry said,” We have mutually agreed that let us now become more ambitious and instead of our earlier target of an overall USD 100 billion bilateral trade by 2030. We shall now look at non-petroleum bilateral trade of $100 billion by 2030, which means doubling our non-petroleum trade from $48 billion today to $100 billion in the next seven years.”
It was also decided during the meeting to establish a number of committees, subcommittees, and technical councils to oversee the implementation of the trade agreement's various provisions, including those relating to goods trade, customs facilitation, rules of origin, sanitary and phytosanitary issues, technical trade barriers, trade remedies, investment facilitation, and economic cooperation.
Also, both the countries are soon expected to start making payments for bilateral trade in local currencies- Indian Rupee and Dirham.
According to Department for Promotion of Industry and Internal Trade (DPIIT) data, foreign direct investment (FDI) from the UAE to India increased more than thrice to USD 3.35 billion in the most recent fiscal year from USD 1.03 billion in 2021–22. In comparison to 2021–2022, the UAE was India's fourth-largest investor in 2022–2023. With USD 17.2 billion invested in India in FY23, Singapore was the largest investor, followed by Mauritius (USD 6.1 billion) and the US (USD 6 billion).
Rudra Kumar Pandey, Partner, Shardul Amarchand Mangaldas & Co, said, “The rapidly strengthening of bilateral ties and investment cooperation between India and United Arab Emirates (UAE) can be chiefly attributed to the strong bilateral relations between India and UAE, growth in investment commitments from UAE, and the policy reforms to further ease of doing businesses between the two countries. UAE's investments in India are mainly in sectors like services, sea transport, power and construction activities. One of the crucial factors for the increase in foreign direct investment (FDI) from UAE is the signing of the Comprehensive Economic Partnership Agreement (CEPA) between India and UAE on February 18, 2022 (effective from May 1, 2022)."
According to a Zee Business report, CEPA was the fastest executed bilateral agreement under which the exports increased between India and United Arab Emirates (UAE). The deal increased commerce as well, which helped the domestic market. As a result of this alliance, labor-intensive industries also flourished. According to the research, in the last 11 months, CEPA came in second place for issuing Certificates of Origin, which serve as declarations to satisfy customs or trade regulations and certify the "nationality" of products.
Source: Ministry of Commerce and Industry
It is a form of free trade agreement that includes negotiations pertaining to investment, trade in services, and other aspects of economic cooperation. It might even take into account negotiating in areas like IPR, competition, and customs cooperation for commerce. More extensive than free trade agreements are partnership or collaboration agreements. The CEPA includes a regulatory problems agreement that examines the regulatory component of trade.
The CEPA is the first comprehensive free trade agreement (FTA) that India has signed in the previous ten years. Over 80 percent of the goods traded between India and the UAE are eligible for preferential market access under the CEPA. In particular, sectors including gems and jewellery, textiles, leather, footwear, sporting goods, plastics, furniture, agricultural and wood products, engineering products, medical equipment, and vehicles will profit from the decrease or abolition of tariffs on India's exports to the UAE.
The CEPA covers 11 broad service sectors and more than 100 sub-sectors. A liberal and nondiscriminatory regime for cross-border investment between India and the UAE is provided by the CEPA. Provisions on dispute resolution and collaboration for investment facilitation are also covered.
One of the question which would come across our minds is that why did India and UAE sign a CEPA rather than a Free Trade Agreement (FTA). In terms of partnerships over a greater coverage of areas and the type of agreements, CEPA is, as its name implies, is more extensive and ambitious than an FTA. A CEPA is more ambitious in terms of a comprehensive covering of many areas, such as services, investment, IPR, government procurement, disputes, etc., whereas a standard FTA focuses only on products. Second, compared to an FTA, CEPA takes a closer look at the regulatory aspects of trade.
Some of the key sectors, including labour-intensive sectors, that have witnessed significant export growth on account of the CEPA include: Mineral Fuels; Electrical Machinery (particularly telephone equipment); Gems & Jewellery; Automobiles (Transport vehicles segment); Essential Oils/Perfumes/Cosmetics (Beauty/Skin care products); Other Machinery; Cereals (Rice); Coffee/Tea/Spices; Other Agri Products; and Chemical Products
Utilization of the India-UAE CEPA has been increasing steadily on a month-on-month basis. Number of Preferential Certificates of Origin (COOs) issued under the CEPA increased from 415 in May 2022 to 8440 in March 2023. Over 54,000 COOs issued under the CEPA during the 11-month (May 22 – March 23) period.
Under the India-UAE CEPA in the Goods Domain, the UAE eliminated duties on 97.4 percent of its tariff lines corresponding to 99 percent of imports from India. India has obtained immediate duty elimination on over 80 percent of its tariff lines corresponding to 90 percent of India’s exports in value terms.
USA and UAE are India’s top export destinations. Also, remittances are an important source of maintaining foreign exchange reserves and they significantly contribute in the growth of economy. Around 10 million Indians live across the Gulf, sending remittances of about $45 billion annually on average, according to certain estimates. India was the largest recipient of remittances in the world in 2021, receiving around $87 billion, approximately 50 percent of which came from the Gulf, according to a World Bank report. This was nearly twice the remittances to the next highest recipient, Mexico, at $42.9 billion.
Source: RBI Remittance Survey
As a member of the GCC, the UAE has close economic ties to Saudi Arabia, Kuwait, Bahrain, and Oman, with whom it also shares a common market and a customs union. With the help of this FTA with the UAE, India will be able to take advantage of the UAE's strategic location and relatively simple access to the African market and its many trading partners, which will enable India to join the supply chain there, particularly in the handloom, handicraft, textile, and pharmaceutical industries.
Also, Indian Commerce and Industry Minister Piyush Goyal stated on June 12 that India and the UAE are looking into methods to enhance trade in value-added gold and gold products. He said that, after Switzerland, the UAE is one of India's main sources of gold and that New Delhi would like to promote commerce with the UAE even more. A free trade agreement allows India to grant some tariff exemptions on the import of gold from the United Arab Emirates. India has consented to import duties that are lenient for up to 200 tonnes of gold each year. Gold imports are generally subject to a 15 percent tariff.
