In what will be the first major trade deal implemented by the Modi government, India and the United Arab Emirates (UAE) will officially sign a Comprehensive Economic Partnership Agreement (CEPA) on February 18. Negotiations on the deal have been completed in record time, having been officially launched in September 2021.
On Friday, Prime Minister Narendra Modi is to host a bilateral summit at which the trade agreement between the two countries will be signed by commerce and industry minister Piyush Goyal and the UAE’s minister of economy Abdulla bin Touq Al Marri, the commerce department said on Thursday.
The UAE is India’s third trading partner globally, after the United States and China. Bilateral trade between India and the UAE was worth $43.3 billion as of 2020-21, and is spread across thousands of traded items. In 2019-20, the pre-pandemic year, trade between the two countries was estimated at $59 billion.
Moneycontrol had reported earlier that negotiations were almost complete and Modi was set to inaugurate the pact during his planned visit to the UAE and Kuwait in early January.
The upcoming deal will be an ‘early harvest’ component of a far more comprehensive trade and economic partnership deal in the future. An early harvest trade deal is one in which both parties sign off on a set of relatively easily achievable deliverables.
India-UAE trade
Big numbers
“However, it is expected to open up a greater volume of trade flows immediately between the nations and provide benefits to a wide segment of Indian exports. This pact has targeted specific goals such as tariff reduction and market access on select items while leaving more contentious items off the agenda,” a senior official said.
The deal plans to raise bilateral trade to $100 billion within the next five years. The official said India has pushed for easier export norms for textiles, electronics and, most importantly, gems and jewellery.
According to the Gems and Jewellery Export Promotion Council (GJEPC), the UAE accounts for 80 percent of India’s plain gold jewellery exports and 20 percent of studded jewellery exports. It is overall the third-largest export destination for all gems and jewellery shipments from India, while also being the second-largest source of imports.
But after the pandemic hit, jewellery trade with the UAE saw the sharpest fall (contracting 41.5 percent) among the top 10 gem and jewellery export destinations, according to GJEPC data. The industry now hopes the trade deal will lead to a leap in exports.
“The UAE is a gateway to the entire Middle East region and the proposed abolition of the 5 percent import duty in UAE would lead to increased prosperity on both sides of the Arabian Sea,” GJEPC chairman Colin Shah said.
India also aims to grow the volume of apparel exports. ”The UAE is a large retail market with players all across the value chain. This includes major western fashion chains, wholesale buyers from North Africa and all over the Middle East, as well as major resellers connected to the trade,” a senior functionary of the Apparel Export Promotion Council said.
Officials also said the deal would cement economic partnership with the UAE and provide the kind of clout and access that had been secured by China nearly a decade ago.
“The understanding is that despite being long-time allies, India has never been able to fully utilise the economic opportunities offered by the Persian Gulf nations to the extent that others such as the United States, United Kingdom and European Union have,” a senior diplomat stressed.
The official added that the government intends to use the Cabahar port in Iran as a shipment hub as it would mean a greatly reduced distance to ports in the UAE.
On its part, the UAE is eyeing the food, medical and financial sectors in India, apart from digital trade and space.
First major FTA
However, the deal with UAE will be the first major pact to be successfully negotiated and launched since the Modi government came to power in 2014.
Talks with the UAE were held to a tight deadline to complete the negotiations. Both sides had hoped to end the preliminary round of talks by the end of December, a deadline so tight that it was considered unprecedented. Both nations had publicly stated that they wished to sign a formal agreement in the early part of 2022.
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