• UGI USER
  • Aug 28, 2023
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Q. The India-UAE CEPA will serve as a catalyst to bolster economic ties between the two countries and give India greater access to the region. Discuss

Approach:

  • Start with a brief note explaining India-UAE ties.
  • Bring up the recently concluded CEPA.
  • Highlight its significance across a range of domains, mainly economic.
  • Conclude appropriately.

Answer:

The UAE is India’s third largest trade partner after the USA and China and the second largest export destination. This relationship got a further boost recently with the signing of the Comprehensive Economic Partnership Agreement (CEPA) in 2022.

India-UAE CEPA is UAE’s first comprehensive strategic partnership with any country, and it is India’s first Free Trade Agreement (FTA) in a decade. One of the primary objectives is to increase the bilateral non-oil trade to US$ 100 billion in the next five years.

Economic significance of India-UAE CEPA, which will enhance India’s engagement in the region.

  • Goods Trade: India is expected to benefit from preferential market access covering over 99% of Indian exports to the UAE in value terms, especially for sectors such as gems and jewelry, textiles, leather, medical devices, automobiles etc.
  • Services Trade: Indian service providers will have access to about 111 UAE sub-sectors from the 11 broad service categories such as business services, communication services, construction, educational services etc.
  • Employment Generation: It is also expected that the CEPA would generate 1 million jobs across multiple labor-intensive sectors, inter alia gems and jewelry, textiles, leather, footwear, furniture, agriculture and food products, plastics, etc. It will also improve the working environment for the large Indian workforce working in the UAE.
  • Access to Middle East and North Africa (MENA) region: It will provide access to markets of other countries in these regions and also serve as a template for a similar agreement with other countries in this region—Saudi Arabia, Qatar, Kuwait, Oman, and Bahrain.
  • FDI flows: The CEPA is expected to accelerate FDI inflows from the UAE into India.

Other benefits under the agreement, which will enhance India’s access in the region.

  • Cultural cooperation: It sets up the India-UAE Cultural Council to promote cross-cultural exchanges and dialogue between thought leaders.
  • Environment: Both countries have decided to cooperate on the implementation of the Paris Agreement and focus on clean energy like green hydrogen.
  • Education: Both countries agreed to establish world-class institutions to drive innovation and technological progress. The first-ever IIT overseas is to be set up in the UAE.
  • Cooperation in international affairs, and defense and security: Both countries agreed to support each other in defense and security to maintain peace in the region.
  • Miscellaneous: The agreement will also benefit both countries in areas like food security, health, skill development, emerging technologies, etc.

Along with these benefits, CEPA has a safeguard mechanism for sudden surges in imports, strict Country of Origin rules to prevent products from other countries moving via the CEPA route. Hence, the CEPA is a historic future-looking agreement that will benefit both India and the UAE in the long run in various ways.