NEW DELHI: Indian industrialists this week said they hoped for a “free flow” of trade between India and the UAE, after the two countries signed a landmark deal that will take annual bilateral trade volume to $100 billion over the next five years.
The Comprehensive Economic Partnership Agreement was signed by Indian Commerce Minister Piyush Goyal and UAE Minister of Economy Abdulla bin Touq Al-Marri in New Delhi on Friday. The agreement, which would reduce tariffs on almost 80 percent of all goods and provide zero-duty access to 90 percent of Indian exports, will take effect in the next 60 days.
The UAE is India’s third-largest trading partner after the US and China, with a bilateral trade volume of $43.3 billion in 2020-21. It is also home to more than 3 million Indian expats, who send billions of dollars in remittances each year.
The new agreement is expected to benefit Indian exports in several sectors, including gems and jewelry, textiles, leather, footwear, sports and engineering goods, and pharmaceuticals.
“This is the first free trade agreement that India is signing with a foreign country after a long time and this will pave the way for the free flow of trade and investment,” the Federation of Indian Chambers of Commerce and Industry said in a statement.
“With tariffs removed and investment eased, that means a good amount of money coming into the Indian system. Also, Indian companies will invest in the UAE to use it as a base for the [Gulf Cooperation Council] and get access to Africa, where otherwise it is difficult for Indians to do business because of financial issues and banking constraints.”
The FICCI believes the agreement will boost non-oil trade and service sectors.
“Lots of non-oil trade is happening in manufacturing items — textile, garments, food processing, renewable energy, defence and space transactions — plus there is a whole range of engineering goods, which would increase trade in these areas,” FICCI said, adding it would increase Emirati investment in India.
Currently, there is a 5 percent import duty on Indian goods exported to the UAE, which will be eased after the CEPA comes into effect.
One sector that is going to particularly benefit from the agreement is the gems and jewelry industry.
“It’s an excellent initiative and is going to help major exporters as well as induce other domestic players to export their products,” Ashish Pethe, the All India Gem and Jewellery Domestic Council chairman, told Arab News.
“The UAE is already a major trading partner of India and there is a strong connection between both the nations. The free trade agreement will substantially help bullion dealers exporting from the UAE to India as well as Indian exporters selling products in the Middle East.”
Indian foreign policy experts believe the free trade deal will provide a new direction to existing economic ties between the two nations.
“This is one of the most important external partnership agreements between India and a Middle Eastern country and underlines the growing significance of India and the UAE for each other,” Muddassir Quamar, an analyst at the New Delhi-based Institute for Defence Studies and Analyses, told Arab News.
“The document provides a roadmap for strengthening ties in new and emerging areas, including cultural cooperation, energy partnership, climate action and renewables, emerging technologies, education and skill development, health and food security, regional cooperation and defense and security. It also broadens the existing comprehensive strategic partnership.”
He said the deal also underscored India’s increasing engagement with Gulf countries and its widening status as a major regional player.
Prof. Zikrur Rahman, founding director of the India-Arab Cultural Centre and a former ambassador to Palestine, called the agreement a “deepening and cementing of strategic partnership between the two countries.”
“It clearly signifies that India is serious in its interactions with the UAE,” he said, “and following a proactive relationship with GCC countries.”