India UAE Bilateral Trade

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Context

On the occasion of the first anniversary of the implementation of the India-UAE Comprehensive Economic Partnership Agreement (CEPA), Commerce Secretary talked about CEPA’s role as a growth engine for India-UAE bilateral trade over the past 11 months.

What is CEPA?

CEPA is a full and deep Agreement signed in February 2022, during a virtual summit between the Prime Minister of India and President of the UAE. CEPA entered into force from 01 May 2022.
Under the India-UAE CEPA in the Goods Domain, the UAE eliminated duties on 97.4% of its tariff lines corresponding to 99% of imports from India.
India has obtained immediate duty elimination on over 80% of its tariff lines corresponding to 90% of India’s exports in value terms.
Most of these tariff lines correspond to the labour-intensive industries/sectors such as oil seeds & oils, beverages, cotton, fish & fish products, textiles, clothing, gems and jewellery, leather, footwear, pharmaceuticals and many engineering products.
In the Services Domain, broader and deeper commitments have been taken across all the sectors and modes of supply. Out of the 160 services subsectors, India has offered 100 sub-sectors to the UAE and the UAE has offered 111 sub-sectors to India.

Contribution to trade

The Bilateral Trade between India and the UAE has touched historic highs during FY 2022-23.
Trade has increased from US$ 72.9 billion (Apr 21-Mar 2022) to US$ 84.5 billion (Apr 22-Mar 2023) registering a year-on-year increase of 16%.
During the CEPA Implementation period (from May 22 to Mar 23), bilateral trade increased from US$ 67.5 billion (May 21-Mar 2022) to US$ 76.9 billion (May 22-Mar 2023) – an annual increase of 14%.
During April-March period, Indian exports to the UAE increased from US$ 28 bn to US$ 31.3 bn; an increase of around US$ 3.3 billion; or 8% year-on-year growth in percentage terms.
During the CEPA Implementation period, India’s exports to the UAE increased from 26.2 billion (May 21 – March 22) to 28.5 billion (May 22 – March 23); an 5% y-o-y growth.
India’s Imports from the UAE have grown to USD 53.2 billion (an annual increase of 18.8%) during Apr 22 to Mar 23. Non-oil imports during the same period grew by 4.1%.
Some of the key sectors, including labour-intensive sectors have witnessed significant export growth on account of the CEPA.

Background

India and UAE have shared trade links through the centuries.
The trade, which was dominated by traditional items such as dates, pearl and fishes, underwent a sharp change after the discovery of oil in UAE (oil exports begun from Abu Dhabi in 1962).
With the emergence of UAE as a unified entity in 1971, exports from India started growing gradually over the years.
The real impetus, however, started after Dubai positioned itself as a regional trading hub by early 1990s and about the same time, the economic liberalization process started in India.
UAE was India's third largest trading partner for the year 2021-22 after US and China.
Moreover, UAE is the second largest export destination of India (after US) with an amount of over US$ 28 billion for the year 2021-22.
For UAE, India is the second largest trading partner for the year 2021 with an amount of around US$ 45 billion (non-oil trade).

India's Major Exports and Imports to the UAE

India's major export items to the UAE are: Precious Metals, Stones, Gems & Jewellery, Minerals & Refined Petroleum Products, Food Items (Cereals, Sugar, Fruits & Vegetables, Tea, Meat, and Seafood), Textiles (Garments, Apparel, Synthetic fibre, Cotton, Yarn) and Engineering & Machinery Products and Chemicals.
India's major import items from the UAE are: Petroleum and Petroleum Products, Precious Metals, Stones, Gems & Jewellery, Minerals, Chemicals, Wood & Wood Products.

Investments

The UAE’s investment in India is estimated to be around US $ 20-21 billion of which US 15.18 billion is in the form of FDI while the remaining is portfolio investment.
UAE is the 7th biggest investor in India in terms of FDI.

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PRACTICE QUESTION

Q) CEPA has made a significant impact on India’s Bilateral Trade with the UAE especially India’s Exports to the UAE. Elaborate. (250 words)