India-UAE Bilateral Trade is $ 60 Billion Going on $ 100 Billion
India striked a first ever trade pact with a Gulf country, Abu Dhabi. India-UAE $ 60 billion partnership speaks volumes, with the latter being the former’s third-largest partner. This brotherhood sailed through the waves of the globally threatening coronavirus that tumbled economies. Referring to the Abu Dhabi crown prince as ‘brother’, Prime Minister Narendra Modi said CEPA’s pact propelled the bilateral trade to reaching new heights. While India will gain from lower prices, new export opportunities, job creation, and reduced taxes, it will also establish a framework to assist UAE investors in accelerating their infrastructure and logistics chain investments in India.
CEPA to Attract Investments
The CEPA, the negotiations for which were launched in September 2021, is expected to “usher in stronger economic relations between the two countries and open new avenues for trade and investment,” read the joint India-UAE vision statement.
Once CEPA flags off, investments from the UAE are projected to increase significantly as a result of the trade treaty, with Abu Dhabi aiming to invest extensively in Jammu and Kashmir. From $3 billion in 2014, UAE investments in India have climbed to $17 billion now.
Earlier, UAE-based firms Emaar and Etisalat faced legal issues around investments in India. Now, It is widely observed that there has been a significant shift in the UAE's approach to investments in India, compared to prior times when they felt hampered by "legacy issues like Emaar and Etisalat." Those issues were encountered last year through a High Level Task Force on investments.
Both parties have also agreed to construct a dedicated India Mart in Jebel Ali Free Zone, a dedicated investment zone for UAE enterprises and joint ventures that would focus on establishing a food corridor and increasing food exports from India.
As for energy cooperation, the UAE has agreed to increase its involvement in India's Strategic Petroleum Reserves Program.
“The UAE is one of India’s key energy providers and remains committed to meeting India’s growing energy demand and is proud to have been the first international partner to invest by way of crude oil in India’s Strategic Petroleum Reserves Program. Indian companies have steadily increased their participation across the entire UAE’s energy sector and represent some of Abu Dhabi’s key concession and exploration partners,” the statement said.
It added, “Further work will be undertaken to identify new collaboration opportunities to support India’s energy requirements, including new energies, and ensure the provision of affordable and secure energy supplies to India’s growing economy.”
Maritime Cooperation Workout
Recalling the recent attacks by Yemen’s Houthis that resulted in the casualties of two Indian nationalities, the Indian PM said both nations will stand shoulder-to-shoulder against terrorism.
According to the vision document, both parties committed to strengthen maritime cooperation and reaffirmed their shared commitment to fighting extremism and terrorism in all forms, including cross-border terrorism, at both the regional and international levels.
Likewise, India and the UAE have also held regular meetings on Afghanistan. Anwar Gargash, the UAE's Presidential Advisor, visited India after the Taliban took control of Kabul to discuss the situation.
$ 60 to $ 100 Billion Plan
Currently sitting at $ 60 billion, the trade between India and UAE will reach up to $ 100 billion in the next five years, with trade in services to give a $ 15 billion boost to that plan. While that’s on, a new set of employment opportunities will arise, raise living standards and provide wider social and economic opportunities in both nations.
According to India's ‘conservative’ projections, greater commerce will likely result in the creation of 10 lakh jobs in areas such as textiles, pharmaceuticals, gems and jewellery, plastic products, auto and leather.
10 Percent Tariffs on Commodities
For the first time, a distinct annexe on medicines has been included to allow access to Indian pharmaceutical products. The agreement has strict rules of origin and value addition criteria in place to prevent third-country goods from the UAE, a global trading hub, from entering India at reduced tariffs.
To protect sensitive industries from growing competition, India has placed 10 percent of tariff lines on a negative list that will not be subject to rate reductions. Dairy, fruits, vegetables, cereals, tea, coffee, sugar, food preparation, tobacco, petroleum waxes, auto and auto parts, coke, dyes, soaps, natural rubber, tyres, footwear, processed marbles, toys, plastics, and medical gadgets are among the commodities on the list.
Import Tariffs to be Abolished
Import tariffs on 90 percent of India's exports to the UAE (nearly 80 percent of total tariff lines) will be abolished immediately after the accord is implemented, and 97 percent of tariff lines will be abolished over the next five years. India, on the other hand, plans to reduce import tariffs on around 65 percent of tariff lines immediately and on 90 percent in ten years. India has also agreed to grant the UAE a 200-tonne gold tariff-rate quota, with the import duty being one percentage point lower than the rest of the globe.
Sectors to be Impacted by the Tariffs
In labor-intensive sectors including gems and jewellery, textiles, leather, footwear, sports goods, plastics, furniture, agricultural and wood products, engineering products, pharmaceuticals & medical devices, and autos, Indian exporters are projected to earn significant advantages. In fact, the CEPA is expected to boost the competitiveness of $26 billion worth of Indian exports that are currently subject to a five percent UAE import charge. The services industry could also benefit significantly.
Due to the pandemic, bilateral commerce between India and the United Arab Emirates fell to $44 billion in 2020-21, compared to around $60 billion pre-pandemic. However, there appears to be a comeback in 2021-22, with two-way commerce reaching $52.76 billion in April-December. India's exports totalled $20 billion, while the UAE's imports totalled $32.7 billion. Petroleum and allied items, precious metals, stones, gems & jewellery, and chemical products were India's major imports from the UAE, while it exported mineral fuels and oils, pearls, valuable stones, metals, and coins, electric & electronic equipment, and textiles.