India-UAE Comprehensive Economic Partnership Agreement (CEPA), Growth Engine for India-UAE Bilateral Trade

India-UAE CEPA: India-UAE Comprehensive Economic Partnership Agreement (CEPA) is a bilateral trade treaty between two countries to promote trade and commerce b/w them. India-UAE Comprehensive Economic Partnership Agreement is also important for UPSC Prelims Exam 2023 and UPSC Mains Exam (GS Paper 2- International Relations, Bilateral Relations between India and Other Countries of the World).

India-UAE CEPA in News

Recently, Commerce Secretary Shri Sunil Barthwal extended his congratulations to the people of India and the UAE on the first anniversary of the implementation of the India-UAE Comprehensive Economic Partnership Agreement (CEPA).

• He also talked about CEPA’s role as a growth engine for India-UAE bilateral trade over the past 11 months.
• 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.

India-UAE CEPA Benefits

According to the Commerce Secretary, efforts are ongoing to enhance the Ease of Doing Business between India and the UAE. Industry representatives also reported utilizing CEPA to drive growth in their respective sectors. They shared their positive experience of leveraging the agreement for this purpose.

India-UAE Bilateral Trade Increase

During the past one year, CEPA has made a significant impact on India’s Bilateral Trade with the UAE and particularly India’s Exports to the UAE (Oil and Non-Oil).

• The Bilateral Trade between India and the UAE has touched historic highs during FY 2022-23.
• Trade has increased from US$ 72.9 billion (Apr 21-Mar 2022) to US$ 84.5 billion (Apr 22-Mar 2023) registering a year-on-year increase of 16%.
• During the CEPA Implementation period (from May 22 to Mar 23), bilateral trade increased from US$ 67.5 billion (May 21-Mar 2022) to US$ 76.9 billion (May 22-Mar 2023) – an annual increase of 14%.

India’s Import- Export to UAE during India-UAE CEPA

Exports from India to the UAE have also registered a multiyear high. During April-March period, Indian exports to the UAE increased from US$ 28 bn to US$ 31.3 bn; an increase of around US$ 3.3 billion; or 11.8% year-on-year growth in percentage terms. During the same period, growth in India’s global exports was 5.3%, excluding the UAE, India’s global exports grew at 4.8%.

• 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% y-o-y growth.
• During the same period, India’s global exports, excluding the UAE, grew at 3.1%.
• India’s Imports from the UAE have grown to USD 53.2 billion (an annual increase of 18.8%) during Apr 22 to Mar 23. Non-oil imports during the same period grew by 4.1%.

Sectors witnessing High Growth during India-UAE CEPA

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

India-UAE CEPA Background

Signed on 18th February 2022, the Comprehensive Economic Partnership Agreement (CEPA) between India and the UAE is a comprehensive and extensive agreement. The agreement was inked during a virtual summit between the Prime Minister of India, Shri Narendra Modi and His Highness Sheikh Mohamed bin Zayed Al Nahyan, the President of the UAE and Ruler of Abu Dhabi. India-UAE Comprehensive Economic Partnership Agreement (CEPA) came into effect on 1st May 2022.

• 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.

• Coverage of Service Sector: In the Services Domain, broader and deeper commitments have been taken across all the sectors and modes of supply.
  • Out of the 160 services subsectors, India has offered 100 sub-sectors to the UAE and the UAE has offered 111 sub-sectors to India.

• 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.

India-UAE CEPA Tariff Reduction

Under the India-UAE CEPA in the Goods Domain, the UAE eliminated duties on 97.4% of its tariff lines corresponding to 99% of imports from India.

• India has obtained immediate duty elimination on over 80% of its tariff lines corresponding to 90% of India’s exports in value terms.
• Most of these tariff lines correspond to the labour-intensive industries/sectors such as oil seeds & oils, beverages, cotton, fish & fish products, textiles, clothing, gems and jewellery, leather, footwear, pharmaceuticals and many engineering products.

India-UAE CEPA Expected Outcomes

• Boost Bilateral Trade: India-UAE FTA is expected to boost annual bilateral trade to $100 billion within 5 years of its adoption, up from about $60 billion currently.
• Benefit Labour-intensive sectors: India-UAE CEPA would boost the country’s exports in a number of labour-oriented sectors.
  • These sectors would include gems and jewelry, textiles, leather, footwear, sports goods, engineering goods, and pharmaceuticals.
• Employment Generation: India-UAE CEPA is likely to create an estimated 10 lakh jobs in India.
• Strategic Advantage: the deepening of the relationship with the UAE would also help Indian exporters gain access to other West Asian countries, Africa and some parts of Europe.
• Generate Employment Opportunities in the Technology sector: The India-UAE CEPA will open many new opportunities for Indians to work in UAE, including in fintech, ed-tech, green tech, automation and Artificial Intelligence.

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