India-Uae Comprehensive Economic Partnership Agreement

During a virtual conference on 18^th February, 2022, India and the United Arab Emirates finalised a Comprehensive Economic Partnership Agreement (CEPA). This Free Trade Agreement (FTA) which will lower import tariffs on the vast majority of Indian exports to the country reflects mutually reinforcing economic visions and similar geopolitical outlooks of India and UAE. The partnership with the United Arab Emirates (UAE) is at the heart of India’s "Extended Neighborhood Policy," a pioneering Gulf policy. Indians now make up UAE's "biggest minority ethnic group," accounting for about 38 per cent of the country's overall population.

What is CEPA?

• It is a trade agreement that covers services and investment, and other areas of economic partnership. It also covers areas such as trade facilitation, customs cooperation, and Intellectual Property Rights.
• India-UAE CEPA is set to benefit about 90 per cent of trade between both countries. It is expected that the agreement will lead to an increase in bilateral trade from the current $60 bn to $100 bn in the next 5 years.

Benefits of CEPA

• Market Access: It will provide both countries with India with market access to the entire West-Asian and African areas in industries such as gems and jewellery, textiles, leather goods, and software exports via the United Arab Emirates. The UAE would gain improved market access to India for vital exports such as petrochemicals, metals, and dates.
• Infrastructure: India's industry may profit from the UAE's superior multimodal transport and logistics infrastructure by using these as trade hubs with Africa and Europe.
• Lower Tariffs and Boost Exports: The Free Trade Agreement (FTA) is expected to lower tariffs on 80% of items and provide duty-free access to 90% of India's exports to the UAE.
• Safeguard Mechanisms: The agreement establishes a permanent safeguard system to protect firms in both countries from an unjustified increase in the volume of imports of any given commodity.
• Boost Employment: It will generate a million job opportunities for our youngsters and a plethora of prospects for our MSMEs.

Reasons for UAE’s Tilt towards India

• India as a Buyer of Oil and Energy: India imports more than 80% of its oil. Its energy needs are highly dependent on foreign imports of the fossil fuel. UAE can act as a reliable and alternative supplier of the energy resources.
• Geopolitical Reason: In the case of a battle with Saudi Arabia or the United States, Iran has repeatedly threatened to close the Strait of Hormuz. The United Arab Emirates will also suffer as a result of this.
• Convergence on Issue of Terrorism: Following the assassination of five UAE diplomats in Kandahar, Afghanistan, there has been a growing convergence between India and the UAE on the subject of terrorism. Both countries stressed the importance of confronting terror groups in a non-discriminatory manner.
• Incapable Pakistan: Pakistan was seen as a partner by the United Arab Emirates, which formed a strong economic and security relationship with it. Pakistan, on the other hand, does not appear to be assisting the UAE as it is unable to curtail terrorist activities operating from its borders across West Asia.

Significance of CEPA for India

• Exports and Investment: The UAE has established itself as a major economic centre not just in the Middle East/West Asia region, but also globally.
• oUAE would be an ideal export market for Indian electronics, vehicles, and other technical items.
• It will result in larger investment flows and vast new prospects for critical industries in both India and the UAE, including as air transportation, the environment, investment, digital trade, and others.
• India’s concerns over RCEP: India did not join the Regional Comprehensive Economic Partnership (RCEP) in November 2019 as India's concerns about the protection of industrial, agricultural, and dairy interests were not addressed.
• India’s Approach towards FTAs: India is no longer signing FTAs only to become a member of a group. Instead, India prioritizes reciprocal access, favourable market conditions, and fair competition in both goods and services trade and ideals of democracy, transparency, and mutual development.
• Integration in Global Supply Chain: The UAE is a signatory to a number of regional and bilateral free trade agreements, including those with GCC countries, which would pave the road for improved relations with the GCC. This can boost India’s efforts on getting meaningful market access and aiding the integration of Indian industry into global value chains.

In West Asia, India-UAE relations have become a focal point of India's ‘Extended Neighborhood’ and ‘Look West’ policies. The Abraham Accords have opened up a new window of opportunity for stronger India-UAE coordination and cooperation. In a broader regional context, the CEPA could serve as a model for the ongoing free-trade agreement (FTA) negotiations between India and the Gulf Cooperation Council (GCC).