India-UAE CEPA

General Studies Paper 2

Context:

• Recently, the Prime Minister of India recognized the valued utilization of India-UAE CEPA by Indian Exporters.

Comprehensive Economic Cooperation Agreement (CEPA)

• CEPA is a comprehensive agreement between India and the United Arab Emirates that seeks to enhance the economic and commercial ties between the two countries.
• The agreement aims to increase trade and investment,improve market access, and promote economic growth between India and the UAE.
• CEPA was signed in 2020and is seen as a significant milestone in the economic relationship between India and the UAE.
• Under CEPA, the two countries have committed to reducing barriers to trade and investment, which will make it easier for businesses from both countries to engage in trade and investment activities.
• The agreement includes provisions for reducing tariffs on goods, services, and investment, as well as for promoting the movement of people, goods, and services between India and the UAE.
• CEPA is expected to provide a major boost to the economic relationship between India and the UAE, as it will increase trade and investment, improve market access, and provide a more favorable environment for businesses to operate in.
• The agreement is expected to benefit a range of sectors, including but not limited to information technology, engineering, pharmaceuticals, and services sectors.
• CEPA is expected to promote the development of economic and commercial ties between India and the UAE, and to provide a foundation for further cooperation between the two countries in the future.
• It is projected to reach US$100 billion in goods trade and over US$1.5 billion in trade in services in the next five years. Built on three pillars of trust, transparency, and talent.

Benefits 

• For India:
  • Preferential market access provided by the UAE on more than 97 percent of its tariff lines, accounting for 99 percent of Indian exports to the UAE in value terms
  • Preferential market access for labour-intensive goods such as textiles, leather, footwear, sports goods, plastics, furniture, agricultural and wood products, engineering goods, pharmaceuticals, and automobiles
  • Preferential market access for services sector including computer-related services, health, tourism, travel, engineering, and accountancy
  • Creation of more than one million jobs for the Indian workforce through enhanced trade liberalisation and market access
  • UAE committed to issuing 140,000 employment visas to skilled Indian professionals by 2030
  • Three-year visa for intra-corporate transferes and a 90-day visa for business visitors and contractual suppliers from India
• Benefits for the UAE:
  • Boost to the UAE’s GDP (US$9 billion) by 1.7 percent by 2030
  • Zero-duty market access for 90 percent of exports from the UAE into India, benefiting commodity exporters of petrochemicals, aluminum, and copper.

Importance of UAE

• Trade and Investment: UAE is one of India’s largest trading partners, with bilateral trade reaching nearly $60 billion in 2019-20. UAE is also a significant source of foreign investment for India.
• Energy Security: UAE is a major supplier of oil to India, making it an important partner in India’s energy security.
• Strategic Location: UAE’s location makes it a gateway for India to access the wider Gulf region and Africa.
• People-to-People Ties: There is a large Indian diaspora in the UAE, estimated to be around 3 million people, making it a significant cultural and economic bridge between the two countries.
• Political and Defence Cooperation: India and UAE have a strong political and defence relationship, with regular high-level exchanges and cooperation on regional and global issues.

Challenges

• Balancing Relations with Iran: India has traditionally maintained close ties with Iran, but the UAE has been critical of Iran’s regional behaviour and has sought to counter its influence. India has had to balance its relationships with both countries, which has at times led to tensions.
• Competition for Influence in the Gulf: Both India and the UAE are seeking to increase their influence in the Gulf region, and this competition has sometimes led to friction in their relationship.
• Differences on Regional Issues: India and the UAE have different perspectives on some regional issues, such as the conflict in Syria, which has at times created tension in their relationship.
• Labor Issues: There have been concerns raised about the treatment of Indian workers in the UAE, which have sometimes strained relations between the two countries.

Way Ahead

• Despite these challenges, India and the UAE continue to work towards strengthening their relationship and overcoming these obstacles. Both countries recognize the importance of their relationship and have taken steps to deepen cooperation in various areas, including trade, investment, energy security, and people-to-people ties.
• Overall, the UAE is an important partner for India in several areas, and the two countries continue to work towards strengthening their relationship.