India-UAE Comprehensive Economic Partnership Agreement (CEPA) enters into force

September 23, 2021

India and the United Arab Emirates (UAE) commenced discussions on the India-UAE Comprehensive Economic Partnership Agreement (CEPA). Both nations indicated a willingness to negotiate a mutually beneficial economic agreement in order to build on the progress made under the Comprehensive Strategic Partnership agreed in 2017.

What is Comprehensive Economic Partnership Agreement (CEPA)?

  • CEPA is a sort of free trade agreement that encompasses discussion on the trade in services and investment, and other areas of economic collaboration. It may even contemplate negotiating in areas like trade facilitation and customs cooperation, competitiveness, and intellectual property rights.
  • Partnership or collaboration agreements are broader than Free Trade Agreements. CEPA also investigates the regulatory component of commerce and includes a regulatory agreement. India has signed CEPAs with South Korea and Japan.
  • India-UAE CEPA: It is projected that bilateral trade in products would reach USD 100 billion within five years of the agreement’s signing, and trade in services will reach USD 15 billion, resulting in greater social and economic prospects in both countries.

May 3, 2022

India and UAE sign CEPA

The UAE’s CEPA (Comprehensive Economic Partnership Agreement) with India is now operational, with the first shipments under the new zero or decreased import tariff from India expected to arrive in the UAE after the Eid vacations. This paves the way for UAE-India trade volumes to surpass $100 billion in the next five years.

For imports to the UAE, 172 goods from India will be duty-free on Day 1, with the goal of adding 11 additional products to the zero rate by the fifth year. As per UAE and Indian business leaders, the CEPA alliance, signed in February, presents prospects for the expansion of investment flows across industries, not simply those dominated by current trade connections.

The UAE will pursue the structure of the accord in similar trade deals with Israel and Turkey. The CEPA with Israel is apparently near completion, whereas the CEPA with Turkey has only recently begun. 

There will be forthcoming trade alliances for India as well, with one with the United Kingdom to be implemented within the next few months. With the implementation of the CEPA, the investment flow between the UAE and India is expected to increase significantly. As part of the Agreement, a new council to monitor investment concerns will be constituted.

For imports to UAE, on Day 1 itself, 172 items from India will have complete import duty wavier and aims to add 11 more items to the zero rate by the fifth year.”

123 products with zero import duty

For imports from the UAE to India, 123 articles have been designated for immediate duty removal, while 33 further items will have zero tariffs by the fifth year (2027) and four more by the seventh year (2029). Tariffs would also be reduced for 35 commodities imported into India (30% to 15% in the fifth year).

“The nations have agreed to establish a technical council on investment, trade promotion, and simplification, which will seek to remove trade and investment barriers,” Menon added. “In order to boost bilateral trade and large-scale investments, the proposed council will interact with the private sector in the UAE and India.”

Century Financial’s CEO Bal Krishen Rathore believes the formation of a technical council to solve investment-related issues will be a turning point. “Now that an official organization has been established to remove any bottlenecks,” he added, “CEPA is expected to promote investments.”

“The council’s objectives, as per the agreement, are to promote and improve investment and trade cooperation and facilitation between the parties; monitor investment and trade relations, find out ways to expand investment and trade, and recognize issues related to investment and trade that may be suitable for further discussion.”

Growth in FMCG and Agriculture sector

Agriculture and food-related industries, in particular, should witness an increase in UAE investment in India. This will be part of the UAE’s attempts to address its worries about food security.

The Under-Secretary of the Ministry of Finance or an authorized representative will represent the UAE, while India will be represented by a Joint Secretary (or equivalent) from the Department for Promotion of Industry and Internal Trade.

“Creating a body with high-level representation will give it enough strength to deal with any possible problems,” Rathore added. “Because the UAE is India’s third-largest trading partner, investments should follow trade, and aggregate numbers should skyrocket in the coming years.”

UAE’s awareness campaign 

The UAE Ministry of Economy said on April 21 that a new portal has been launched to give all necessary information on the CEPA with India. It may be used as a single-source window for companies headquartered in the UAE, as well as “investors who desire to capitalize on the benefits.”

“This comprehensive knowledge base expands access to new possibilities under the scope of this Agreement for exporters, suppliers, investors, business owners, pioneers, and talents, thereby strengthening their capacity to develop specific growth strategy focused on the Indian market,” said Juma Al Kait, Assistant Under-Secretary of International Trade Affairs at the Ministry.

The CEPA contains 18 chapters that detail the procedures that firms in the UAE can use to extend their commercial relationships with India.

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