Why is the trade deal with UAE a significant step for India?

On February 18th, India and the United Arab Emirates signed the Comprehensive Economic Partnership Agreement or CEPA, which is the first finalised by the Narendra Modi-led government since it came to power in 2014. (VO 1) The deal was negotiated in a record 88 days and will come into force from May. It aims at increasing the non-oil trade between the two countries to $100 billion in five years from $45 billion 2021. The UAE is currently India’s third-largest trading partner and the second-largest export destination, after the US. While India is the UAE’s second-largest trading partner and the largest in terms of exports. The trade pact is expected to benefit around $26 billion worth of Indian products that are subject to 5% import duty by the UAE. The UAE will remove customs tariffs on nearly 80% of the goods, which account for 90% of India’s exports to the Gulf nation by value. India expects CEPA to generate 10 lakh jobs across labour-intensive sectors such as textiles, gems & jewellery, leather, footwear, pharma, agriculture products, medical devices, sports goods and automobiles. Not just goods, CEPA also covers 11 service sectors and over 100 sub-sectors, which include business services, telecommunications, construction, education, tourism, nursing, finance among many others. The agreement is wide in its scope and includes areas like government procurement, digital trade and intellectual property rights. To protect the interests of domestic producers, India has kept items such as dairy, fruit, cereals, vegetables, tea, coffee, tobacco, dyes, soaps, footwear, petroleum, tyres, toys, aluminium scrap, copper, processed marble, among others, out of the trade pact. The trade deal has also provided a permanent safeguard mechanism, which will protect exporters and businesses from both countries from any unwarranted surge in volumes of any particular product. But the deal comes with stringent rules of origin conditions. At least 40% value addition has been mandated for most goods to avoid routing of products manufactured in third countries to India via UAE. For the first time in a trade agreement, the CEPA provides for automatic registration and marketing authorisation of Indian generic medicines in 90 days, once they are approved in any of the developed countries. India has given duty concessions on gold imported from the UAE, while Indian exporters will get zero duty access to the UAE market for jewellery. This assumes significance as the two countries account for over 16% of the global trade in diamonds, gold, and jewellery.

India is looking to enter into a similar agreement with the Gulf Cooperation Council during this this year itself

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