India clinched its first free trade agreement (FTA) in over a decade on Friday, as it signed the Comprehensive Economic Partnership Agreement (CEPA) with the UAE, with both the sides pledging to boost bilateral trade to $100 billion in five years, from about $60 billion now.
India will gain greater, duty-free market access in many labour-intensive sectors, such as gems & jewellery, textiles & garments, leather and farm products. Similarly, it will have market acess in pharmaceuticals and engineering goods, among others. Similarly, the UAE will have easier access India’s metal, minerals and petroleum sectors. About 90% of India’s goods exports to the UAE are likely to be covered by the FTA. It will help create about a million jobs in India.
The CEPA was signed by commerce and industry minister Piyush Goyal and UAE’s minister of economy Abdulla bin Touq Al Marri at a virtual summit attended by Prime Minister Narendra Modi and Crown Prince of Abu Dhabi Sheikh Mohammed bin Zayed Al Nahyan. Both the sides will now initiate due processes of ratification in the coming weeks.
“Both nations are entering a golden era of economic & trade cooperation with the signing of India-UAE CEPA,” Goyal tweeted after the agreement was signed.
“Sky is the limit for our trade & economic ties as we commit to building a shared future & enhancing the prosperity of our people,” he said.
India had identified more than 1,000 products across sectors, including gems & jewellery, textiles & garments, leather, spices, engineering goods, chemicals and poultry, where it wanted duty concessions from the UAE under the FTA. Both the sides started formal negotiations from September 23 last year.
While the UAE, India’s third-largest export destination, currently imposes a 5% duty on textiles & garments and jewellery, certain steel products are taxed at 10%. These three segments alone made up 34% of India’s $16.7-billion exports to the UAE last fiscal and 43% in the pre-pandemic year of FY20.
For its part, Abu Dhabi, too, has sought duty concession across broad range of products, including in food items such as dates and confectionary.
The FTA envisages several partnerships across sectors. It proposes investment zone in India for UAE firms and a dedicated India Mart in Jebel Ali Free Zone. Both the sides pledge to create opportunities for Indian investors in advanced industrial technology zones in Abu Dhabi, with focus on logistics, pharma, medical devices, agri, steel and aluminium. The UAE will also support India’s energy needs and ensure affordable supplies. To boost cooperation in climate actions, both the sides agreed to set up a joint hydrogen task force to scale up technologies. India has also agreed to set up an IIT in the UAE.
Earlier this week, Gem and Jewellery Export Promotion Council chairman Colin Shah said the proposed FTA will help drive up India’s gem and jewellery exports to the UAE to as much as $10 billion by FY23 from just $1.2 billion in FY21 (when the shipments were hit by the pandemic). The UAE accounts for 80% of India’s plain gold jewellery exports and 20% of its studded jewellery shipments. Abu Dhabi is also a gateway to the entire West Asian region, Shah said.
The negotiations with the UAE are a part of India’s broader strategy to forge “fair and balanced” trade agreements with key economies and revamp existing pacts to boost trade. The move gained traction after India pulled out of the China-dominated RCEP talks in November 2019. India is also engaged in talks with Australia, the UK and the EU for FTAs.
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