A historic agreement was signed between the two countries on Friday 18 February to strengthen the bilateral ties of India and the United Arab Emirates (UAE) and take the trade between the two countries beyond $100 billion.
This agreement between the two countries is a 'Comprehensive Economic Partnership Agreement' (CEPA). This is also India's first CEPA treaty with any Arab country (country in the Middle East and North Africa).
Under the CEPA treaty, along with increasing the trade in goods, there is also an emphasis on increasing trade in services and investment. For this, apart from reducing tariffs (custom and import duties), there is an emphasis on removing the obstacles in the way of trade.
This CEPA between India and UAE is special in the sense that for this both the countries completed the process of talks very quickly.
It has been completed in just 88 days, which is a record. So far, no CEPA in the world has been implemented in such a short time.
Aim to make business two and a half times in five years
To take India's business with the UAE to new heights, arrangements have been made to enhance cooperation in many areas such as defence, energy, climate, and digital trade.
Prime Minister of India Narendra Modi participated in a joint virtual summit with the Crown Prince of Abu Dhabi, Sheikh Mohamed bin Zayed, on the occasion.
Addressing the conference, PM Modi said, "With increasing access to the market, the bilateral trade in goods and services between the two countries is expected to reach $100 billion and $15 billion in the next 5 years."
In this way, the importance of this Comprehensive Economic Partnership Agreement between the two countries is that in the next five years, the trade of goods between the two countries has been targeted to be two-and-a-half times and the trade of services to two-fold.
Currently, UAE is the third-largest trading partner of India and India is the second-largest trading partner of UAE. In 2021, the bilateral trade of both countries reached about 43 billion dollars.
In this, India's exports were $ 17 billion, while imports were $ 26 billion. This balance of trade is currently tilted in favor of the UAE due to the large-scale import of petroleum products by India.
Other countries will also benefit
India's Commerce Minister Piyush Goyal has said that UAE is a good route for a large section of India's exporters and now they will be able to reach countries in West Asia, Africa, and parts of Europe.
India is currently negotiating with many more countries like the UK, EU, Australia, Canada, Israel to make free trade agreements. It is believed that this agreement with the UAE will give impetus to the rest of the agreements.
India's former envoy to the World Trade Organization (WTO) Jayant Dasgupta spoke to a media organization regarding this agreement.
He said, "The members of the Gulf Cooperation Council ie GCC also want to have a similar CEPA treaty. After this treaty is signed with the UAE, there is every possibility that the talks with the GCC will also be accelerated and it will be completed in the next 6 months. If this happens, India will have access to all the countries of the Gulf.
Apart from the UAE, there are a total of six countries in the Gulf Cooperation Council including Saudi Arabia, Bahrain, Kuwait, Oman, and Qatar.
Which sectors will benefit
After this treaty, the UAE will reduce import duty on about 90 percent of the goods exported from India. Currently, UAE imposes an import duty of 5% on goods coming from India.
The deal also provides for a permanent safety net to protect exporters and traders from sudden surges in quantities of a particular product.
India's gems and jewellery, textiles, leather goods, food products, agriculture, and medical products industries are expected to benefit from the reduction in import duties due to this treaty and getting markets in West Asia.
The jewellery sector of India is going to benefit the most from the reduction of import duty by both countries on the import of gold. India has agreed to levy low import duty on the import of gold up to 200 tonnes every year. India imported about 70 tonnes of gold from UAE in 2020-21.
However, many sectors have been kept out of this agreement to avoid the disadvantages of this agreement.
Such sectors include dairy, fruits, vegetables, cereals, tea, coffee, sugar, tobacco, coke, natural rubber, tires, footwear, toys, plastics, aluminum and copper scraps, medical equipment, autos, and auto parts. . However, they will be given benefits under the Production Linked Incentive Scheme.
Key points of this agreement:-
To accelerate the development of new trade, investment, and innovation dynamics, the joint vision statement of this agreement has set the future direction of relations between the two countries.
1. Economic Partnership
Under the economic partnership, a dedicated India Mart will be set up in the Jebel Ali Free Zone of the UAE, and a dedicated investment zone will be created for UAE companies in India. Along with this, it has also been agreed to make a joint food corridor.
In the UAE, Abu Dhabi will create advanced technology zones for industries in sectors such as logistics and services, pharmaceuticals, medical equipment, agriculture, agritech, steel, and aluminum, creating new investment opportunities for Indian investors.
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