UAE-India Trade Pact


    In News

    • The Comprehensive Economic Partnership Agreement (CEPA) with the United Arab Emirates (UAE) is likely to be signed at a virtual ceremony in the presence of the PM of India and UAE Crown.


    • It will include a digital trade element, which is a first of its kind for both countries.
    • The United Arab Emirates is India’s third largest trading partner and second largest export destination.
    • Bilateral trade between India and the UAE stood at $43.3 billion in 2020-21.
      • Exports were $16.7 billion, and imports, driven by oil, pushed the balance in favor of the UAE at $26.7 billion in 2020-21.
    • The GCC has FTAs with the European Free Trade Association (EFTA) comprising Iceland, Norway, Lichtenstein, Switzerland, and Singapore.
    • India is negotiating a raft of other FTAs with the UK, the EU, Australia, Israel and Canada.

    Issues/ Challenges

    • Lack of negotiations:
      • A free trade agreement with the GCC comprising Saudi Arabia, Kuwait, UAE, Oman, Qatar and Bahrain as its members was first envisaged in 2007, but got stuck after a couple of rounds of negotiations.
    • Lacking Global Giant Experience: 
      • Despite being a US $2.5 trillion economy, Indian businesses are small in size. In fact, none of the Indian business giants come close to the big global conglomerates that have the capacity, infrastructure and experience to handle huge investments. 
    • Procedural Issues: 
      • Including lack of planning, lack of complete information, bureaucratic bottlenecks continue to remain a challenge for foreign investors despite significant efforts by the government in this direction to make investments easy and convenient. 
    • Legal Issues:
      • Legal problems have in the past dampened foreign investments from coming to India. For example, the investments from UAE’s Etisalat and Etihad had got stuck in legal problems, thus dampening investor enthusiasm. While checks and regulations are needed, better streamlining of the procedures and processes help in avoiding such problems.
    • Political Will: 
      • There are challenges pertaining to political diversions, especially when an election year is approaching. 
      • India has a tendency to become focused inward and in the process, ignore foreign policy. 
      • The UAE with an appetite for large-scale investments needs to be continuously engaged. 

    Significance of the deal

    • Bilateral trade: The India-UAE CEPA aspires to take bilateral trade to over $115 billion within five years, of this, trade in goods is expected to increase to $100 billion, and in services by $15 billion.
    • Digital trade: Early harvest agreement would likely include a chapter on digital trade which would be aimed at enhancing cooperation between the two countries on digital trade in the future.
      • Digital trade is likely to include frameworks on paperless trading, digital payments and online consumer protection, as well as address issues such as intellectual property rights in digital trade, and challenges to small and medium enterprises.
    • Access to the entire West-Asian region: The agreement is also expected to give Indian industry access to the entire West-Asian region in sectors such as gems and jewelry, textiles, and leather goods.
    • The UAE hopes to get enhanced market access in India for its petrochemicals, metals and dates.
    • Indian goods will flow to the other GCC countries as the UAE has no customs barriers.
    • Energy ties: UAE is India’s third largest supplier of crude oil and second largest supplier of LPG and LNG. Renewable energy is the next stop for bilateral energy ties.
    • It may also give a boost to India’s jewelry exports.  

    Way Ahead

    • Concluding the CEPA negotiations “quickly and constructively” will further strengthen the deep trade and economic ties between India and the UAE.
    • Further, both countries need to identify clear areas of focus and establish ways of working together to resolve trade remedy cases

    Source: IE