India-UAE CEPA Impact on India-UAE Trade

India-UAE CEPA- Relevance for UPSC Exam

• GS Paper 2: International Relations- Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

India-UAE CEPA in News

• Recently, government informed that, the India-UAE Comprehensive Economic Partnership Agreement (CEPA) which came into effect on the 1st of May 2022 is already creating a significant positive impact on India-UAE trade.

Impact of India-UAE CEPA on India-UAE Trade

• Indian exports to the UAE, excluding petroleum products grew from US$ 5.17 billion during June-August 2021 to US$ 5.92 billion during June-August 2022, which denotes an increase of 14%.
• It is pertinent to note that India’s global non-petroleum exports during the same period (Jun-Aug 2022) grew by 3% on an annual basis.
  • This implies the growth rate of India’s non-petroleum exports to the UAE is almost 5 times as that of India’s non-petroleum exports to the world.
• Excluding petroleum related imports, Indian imports from the UAE during the same three-month period grew from US$ 5.56 billion (June-August 2021) to US$ 5.61 billion (June-August 2022) or an increase of 1% in percentage terms.

India’s Export Growth Trajectory in Recent Past

• India’s non-oil export growth of around 14% on year-on-year basis comes in the context of significant macroeconomic headwinds such as-
  • Conflict in Ukraine,
  • COVID-19 related lockdowns in China,
  • Rising inflationary pressures,
  • Expected Policy tightening in advanced economies,
  • Global growth slowdown and consequent reduced demand,
  • Reduction in global merchandize trade (growth slowed down to 3.2% in Q1 2022 vis-a-vis 5.7% in Q4 2021) etc.

India-UAE CEPA: Key Features

• Tariff Reduction: India-UAE FTA is set to reduce tariffs for 80 per cent of goods and give zero-duty access to 90 per cent of India’s exports to the UAE.
  • Annual exports worth about $26 billion from India that currently attract a 5-per cent import duty in the UAE are set to benefit.
• Scope: The India-UAE CEPA agreement covers areas including-
  • Goods,
  • Services,
  • Rules of origin,
  • Customs procedures,
  • Government procurement,
  • Intellectual property rights, and
  • E-commerce.
• Rules of Origin: India-UAE CEPA includes robust rules of origin to protect both economies from misuse of the agreement by third countries, including a requirement of “melt and pour” for steel exports to qualify as domestically produced products from either country.
• Safeguard Mechanism: The agreement also provides a permanent safeguard mechanism to protect businesses in both countries to prevent “any unnecessary or unwarranted surge in volumes of (imports) any particular product
• Speedy Regulatory Approval for Medical Products: Under the India-UAE CEPA, the UAE agreed to facilitate market access and regulatory approval within 90 days for Indian pharmaceutical products and medical products.
  • This facility is available to the products that have been approved in developed jurisdictions such as the US, the UK, the EU, Canada and Australia.
• Focus on Technology and Sustainability: Technology, digital trade and sustainability have a big focus in the New India-UAE partnership.
• An MoU among APEDA, DP World & Al Dahra on the UAE side regarding the “Food Security Corridor Initiative” has been prepared, under which India will be able to play an important role in food security of the UAE.

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