On February 18, India and UAE signed a Comprehensive Economic Partnership Agreement (CEPA) which is the first free trade agreement finalised by Indian government. The deal, negotiated in a record-breaking 88 days, will grant duty-free access to 90 per cent of Indian exports and 65 per cent of UAE products. Sanjay Jain Jyoti Trading, explains its significance and elaborates how the FTA will make it swifter to facilitate higher investment flows for both nations.
In the next ten years, 97 per cent of Indian products will have duty-free access to the UAE market, while 90 per cent of UAE products would have zero-duty access to the Indian market. CEPA will give UAE businesses better access to the world’s fifth-largest economy, lower tariffs in key export industries, and more market access for the Indian services industry. “It is beneficial for UAE because this contract is predicted to boost its GDP by $9 billion till 2030,” informs Sanjay Jain of Jyoti trading. Strengthening foreign commercial links is a key component of this strategy, and India, a long-time economic partner of the UAE is an excellent option as both the nations share longstanding cultural ties.
Elaborating the significance of the deal, Sanjay Jain Jyoti Trading says, “The deal includes a major component of service exports. Business services, telecommunications, construction and allied activities, education, healthcare, the environment, finance and insurance, and tourism, travel and transportation services are among the 11 sectors and more than 100 sub-sectors covered.” In terms of people wishing to supply services under the CEPA, this agreement will make the process easier on both sides.
This agreement contains a ground-breaking feature – a permanent safeguard mechanism that has been agreed upon and can be used in the event of a rapid increase in imports. This is the first time India has entered into a contract requiring a Country of Origin, which will prevent items from other nations from being bypassed via the FTA route. Also, aiming to promote investment and trade flows, it will hold consultations on specific investment and trade matters of relevance to both parties.
Notably, footwear, sporting goods, engineering items, vehicles, and pharmaceuticals are expected to gain ground. The agreement, which is set to take effect in the first week of May 2022, is expected to add one million jobs to India. The country has omitted a number of commodities from the deal, citing a sensitive list of products that account for 10 per cent of tariff lines that are fully exempt. Sanjay Jain Jyoti Group says,“Among the commodities excluded from the agreement are dairy, fruits, vegetables, cereals, tea, coffee, sugar, culinary preparations, cigarettes, toys, plastics, scrap aluminium, and copper. Other regions where domestic output has increased rapidly or where the government is rewarding industry through production-linked incentive schemes were left out of the accord.”
Overall, the CEPA between India and the United Arab Emirates appears to complement the current government’s efforts to increase exports. It will be a valuable tool in the hands of Indian industry, which is familiar with the UAE and, by extension, the Gulf, if it is well handled. Meanwhile, the CEPA between India and the United Arab Emirates attempts to eliminate political risk and uncertainty between two major economic partners.