Wednesday, 09 Oct, 2024
By: Yash Gupte
The CEPA is the first comprehensive free trade agreement (FTA) that India has signed in last ten years. Image Source: IANS
Trade increased by 16 percent compared to the previous year from $ 72.9 billion (Apr 21–Mar 2022) to $ 84.5 billion (Apr 22–Mar 2023). During the CEPA Implementation period (from May 22 to Mar 23), bilateral trade increased from $ 67.5 billion (May 21-Mar 2022) to $ 76.9 billion (May 22-Mar 2023)
The India-United Arab Emirates (UAE) Comprehensive Economic Partnership Agreement (CEPA) recently completed one year of implementation on May 1, 2023. It was signed on February 18, 2022 and came into force on May 1, 2022. It was signed during a virtual summit between the Prime Minister of India, Narendra Modi and His Excellency the President of the UAE and Ruler of Abu Dhabi, Sheikh Mohamed bin Zayed Al Nahyan. Commerce Secretary Sunil Barthwal congratulated the people of India and the UAE on the milestone and talked about CEPA’s role as a growth engine for India-UAE bilateral trade over the past 11 months. The Commerce Secretary said that both sides are continuing to work together to further improve Ease of Doing Business between the two countries.
CEPA has made a substantial impact on India's bilateral trade with the UAE over the past year, particularly India's exports of both oil and non-oil goods to the UAE. During the fiscal year 2022–2023, bilateral trade between India and the UAE reached record highs. Trade increased by 16 percent compared to the previous year from $ 72.9 billion (Apr 21–Mar 2022) to $ 84.5 billion (Apr 22–Mar 2023). During the CEPA Implementation period (from May 22 to Mar 23), bilateral trade increased from $ 67.5 billion (May 21-Mar 2022) to $ 76.9 billion (May 22-Mar 2023) – an annual increase of 14 percent. During the CEPA Implementation period (May 22 – March 23), India’s exports to the UAE increased from $26.2 billion (May 21 – March 22) to $28.5 billion (May 22 – March 23); an 8.5 percent y-o-y growth. During the same period, India’s global exports, excluding the UAE, grew at 3.1 percent. India’s Imports from the UAE have grown to $53.2 billion (an annual increase of 18.8 percent) during Apr 22 to Mar 23. Non-oil imports during the same period grew by 4.1 percent.
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.
After coming into effect on May 1, 2022, the CEPA is anticipated to boost bilateral trade in goods to over $100 billion and services to over $15 billion within five years.
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
The UAE’s investment in India is estimated to be around US $ 20-21 billion of which US 15.18 billion is in the form of FDI while the remaining is portfolio investment. UAE is the 7th biggest investor in India in terms of FDI. Abu Dhabi Investment Authority is the principle sovereign wealth fund of the UAE and one of the world’s largest. ADIA has committed to invest US $ 75 billion in India’s infrastructure sector.
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.
