The Comprehensive Economic Partnership Agreement between India and the UAE

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The Comprehensive Economic Partnership Agreement between India and the UAE

  • India and UAE inked a trade pact, Comprehensive Economic Partnership Agreement (CEPA) during a virtual summit.

What is the India-UAE CEPA about?

  • CEPA is a bilateral trade pact that will cover over a period of time 90% of India’s exports
  • Commodities covered: leather, processed agriculture and dairy products, handicrafts, gems and jewellery, furniture, pharmaceuticals, food and beverages, engineering products and nearly all items produced by Indian economy.
  • It will also include services sector.
  • Indian officials expect services sector to boom by $15 billion in coming five years.
  • Anti - dumping measures: prevent any country from dumping its products into Indian market by usingUAE route.
  • Document has strong rules of origin clauses that prevent coutries to export goods to India taking advantage of relaxed tariff on Indian side.
  • India wants 40% value addition into product from third country before it could be exported to India through UAE.

How will the trade pact benefit India-UAE economic ties?

  • India-UAE economic ties are marked by flow of remittances from UAE to India.
  • UAE hosts at least 3 million Indians who work in diverse sectors of economy and provides it with vital manpower support at all levels.
  • 82% of India’s total remittances originated from seven countries that included Gulf countries like the UAE, Saudi Arabia, Oman and Kuwait.
  • 2019: India received $83 billion from Gulf region.
  • Figure was marginally affected in 2020 when many Indian workers returned home because of pandemic related economic distress.
  • The remittances are expected to rise with full economic recovery of UAE’s post-pandemic economy.

Why did PM Modi refer to the western Quad?

  • Western Quad: Israel, India, UAE and United States has been a regional factor ever since it was convened which was followed by a ministerial meeting of the four countries

Immediate outputs of FTA

  • FTA will allow goods from UAE, especially dates of UAE to enter India.
  • Indian exports will benefit from “zero tariff” that UAE is expected to grant.
  • It will allow increased visibility of Indian products in UAE.
  • Reduction in tariff for Indian jewellery and gems will allow it to enter the UAE in greater volume.

How is the CEPA different from other such trade agreements India is negotiating with countries like Australia?

  • Other agreements are expected to be “early harvest agreements” or interim agreements till both sides conclude final agreement in a comprehensive manner.
  • The India-UAE FTA comprehensive in nature: vast scope of items will come under it.
  • Early harvest agreements are expected to include goods and products but CEPA will cover both goods & services.

When will the agreement come into effect?

  • Process will take 60 days at least.
  • India has expressed hope that CEPA will be in phase of implementation after May 1.