India has on 18th of February signed a Comprehensive Economic Partnership Agreement (‘CEPA’) with the United Arab Emirates. The Agreement, which is expected to be operational with effect from May 2022, while will allow duty-free import of food products, textiles, gems & jewellery and pharmaceuticals into UAE from India, imports of certain petrochemicals and dates from UAE will also see import duty cuts in India.
As per reports, the CEPA will also give easier access for Indian professionals in UAE’s high skill sectors. Both the governments expect the CEPA to increase the bilateral trade from USD 60 billion to USD 100 billion within a span of five years.
This agreement done in just 88 days will, as per reports, add at least 0.7% to India’s GDP while increasing the GDP of UAE by 1.7%.
UAE is the third largest trade partner of India after China and USA and could also become a gateway for exports to many other countries in Africa, Gulf and even East Asia.
As per initial reports, major beneficiaries will be the agriculture and food products followed by medical equipment, pharma, textiles, leather, gems and jewellery and other labour-intensive sectors. The sectors for which Production Linked Incentive (PLI) schemes have been notified have been put under the negative list, in this agreement.
Though final rules are yet to be notified by the Indian Ministry of Finance, as per reports, 40% value addition will be mandated for most goods with a specific clause for the steel sector. It is stated that this specific clause will ensure that the metal products produced in third countries is not routed via India or UAE.
It seems, that a permanent safeguard mechanism will also be put in place which will enable both countries to initiate steps to check misuse of the concessions.
It may also be noted that recently India finished an early harvest agreement with the United Kingdom under the umbrella of the India-UK Free Trade Agreement (FTA) negotiations and is also in talks with Canada, Australia and the European Union to finalise the talks.
Interestingly, the Economic Survey presented before the Indian Parliament on 31 January also pitched for giving a push to the ongoing negotiations for the proposed free-trade agreements as these pacts will help in diversifying the country's export basket and destinations.
