A mutually beneficial trade deal

The signing of a Comprehensive Economic Partnership Agreement (CEPA) with the United Arab Emirates (UAE) may mark an opening up of India’s trade policy. New Delhi has not been seen to be very enthusiastic about pursuing trade agreements. The CEPA is the first such deal signed by the Narendra Modi government. The government had at the last minute decided against joining the Regional Comprehensive Economic Partnership (RCEP), a large multilateral deal with China as a partner. Apprehensions about market domination by China and the ‘Atmanirbharta’ desire were among the reasons for that decision. The government seems to prefer bilateral agreements, instead. An economic partnership and trade agreement was signed with Mauritius last year. Similar bilateral agreements are being pursued with the UK, Canada and Australia. The deal with the UAE was concluded very quickly, after the negotiations officially started in September 2021.

The UAE is India’s third-largest trade partner and both countries have a strategic partnership as well. A lot of India’s trade is now carried out through the UAE, which serves as a transhipment hub. So, it is also expected that the CEPA will help India access other markets, including those in Africa. India has a strong pharmaceuticals sector which, for example, can benefit much from a partnership with the UAE. The agreement aims to achieve a bilateral trade target of $100 billion within five years. It covers 80% of Indian exports to the UAE and is expected to give a boost to export-oriented industries in India. The MSME sector, which has been badly hit recently, may gain much from the UAE’s zero-tariff policy. It has been pointed out that labour-intensive sectors may benefit most from the deal. The services sector will also gain, and there are key provisions for easier movement of Indian workers and professionals. The main Indian import from the UAE is oil, which is crucial for the economy. There are also plans to fast-track work on a special investment zone for UAE companies and joint ventures and to set up a dedicated India Mart in the UAE. The UAE expects more investments from Indian business, which will in turn increase remittances from that country.

There is also the expectation that the CEPA will pave the way for a bigger trade agreement with the Gulf Cooperation Council (GCC), which is a six-nation grouping of the UAE, Saudi Arabia, Kuwait, Bahrain, Qatar and Oman. This may take a long time to materialise, if at all it will, because there are many complexities involved in it. Whether that happens early or not, the CEPA on its own will be of mutual benefit to both partner countries.