Syllabus: GS2/IR/GS3/Economy
Context
- The India-United Arab Emirates (UAE) Comprehensive Economic Partnership Agreement (CEPA) has completed three years of its signing in 2025.
About Comprehensive Economic Partnership Agreement (CEPA)
- It is India’s first deep and full-fledged Free Trade Agreement (FTA) in the last decade.
- It represents a strategic economic collaboration between two major trade partners and is expected to significantly enhance bilateral trade and investment flows.
- Signed in February 2022, CEPA covers a wide range of sectors, including:
- Trade in Goods & Services
- Pharmaceuticals
- Intellectual Property Rights (IPR)
- Investment & Digital Trade
Significance of India-UAE CEPA
- Boosting Bilateral Trade: Aims to increase trade in goods to USD 100 billion and trade in services to USD 15 billion over the next five years.
- Strengthens economic ties with one of India’s largest trade partners in the Gulf region.
- Job Creation & Economic Growth: Expected to generate over 1 million job opportunities for the Indian workforce through trade liberalization and improved market access.
- Preferential Market Access for Indian Goods: Enhances market access for India’s labour-intensive exports. Provides zero-duty market access for 90% of India’s exports to the UAE, improving India’s global competitiveness.
- Strengthening UAE-India Trade Links in the Gulf Region: Expands Indian exporters’ access to UAE’s neighbouring markets, particularly the Gulf Cooperation Council (GCC) states, Africa, and Europe.
Brief overview of the UAE and India relations
- Political : India and the United Arab Emirates (UAE) established diplomatic relations in 1972.
- Multilateral Cooperation: India and the UAE are currently part of several plurilateral platforms such as I2U2 (India-Israel-UAE-USA) and UFI (UAE-France-India) Trilateral, etc. UAE was also invited as a Guest Country to the G-20 Summit.
- Economic & Commercial: India UAE trade, valued at US$ 180 million per annum in the 1970s, is today US$ 85 billion making UAE, India’s third largest trading partner for the year 2022-23 after China and US.
- UAE is the second largest export destination of India (after the US) with an amount of nearly US$ 31.61 billion for the year 2022-23.
- Defence cooperation: It is steered through a Joint Defence Cooperation Committee (JDCC) at the Ministry level, with the signing of Agreement on Defence Cooperation in 2003, which came into effect in 2004.
- Nuclear Cooperation: India and the United Arab Emirates (UAE) signed a Memorandum of Understanding (MoU) for civil nuclear cooperation in 2024.
- In 2015, both countries had agreed to cooperate in “peaceful use of nuclear energy”, the agreement is part of the UAE’s policy of expanding investments into the nuclear energy sector.
- Space Cooperation: Indian Space Research Organisation (ISRO) and the UAE Space Agency signed an MoU regarding cooperation in the exploration and use of outer space for peaceful purposes in 2016.
- Indian Community: Indian expatriate community of approximately 3.5 million is the largest ethnic community in UAE constituting roughly about 35% of the country’s population.
- NRI Remittances: The annual remittances made by the Indian community is 18% of the total remittances to India [2020-21 data].
Challenges
- Trade Imbalances: India has a trade deficit with the UAE, primarily due to high oil imports from the UAE, which makes the economic relationship uneven despite growing non-oil trade.
- Geopolitical Tensions in the Region: Political instability in the Middle East and the Gulf region affect bilateral relations, especially with India’s strategic interests in the region.
- Labor and Migration Issues: India is one of the largest sources of migrant labor in the UAE, and issues related to the welfare and rights of Indian workers have been a point of concern.
- Foreign Policy of UAE: India’s relations with countries like Iran and Pakistan sometimes complicate its relations with the UAE, which maintains different strategic priorities in the region.
Way Ahead
- Strengthen Economic and Trade Ties: Continue to focus on diversifying trade beyond oil, aiming for the USD 100 billion target for non-oil trade by 2030.
- Joint Strategic and Security Cooperation: Enhance collaboration in counter-terrorism, regional security, and defense, focusing on the shared goal of a stable and peaceful Middle East.
- Address Labor and Migrant Issues: Work towards improving the welfare and rights of Indian migrant workers in the UAE through better labor policies and protection mechanisms.
Source: PIB
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