India and the United Arab Emirates are poised to deepen their trade ties this week with the signing of Comprehensive Economic Partnership Agreement.
India Prime Minister Narendra Modi and Sheikh Mohamed bin Zayed bin Sultan Al Nahyan, the Crown Prince of the Emirate of Abu Dhabi, are scheduled to hold a virtual meeting at the end of the week to announce the bilateral trade pact, which officials in India’s Ministry of Commerce say will “unleash a golden era” in their bilateral partnership.
In a virtual closed-door link-up last week, UAE Ambassador Ahmed Albanna announced that negotiators from both countries had finalised the draft of the CEPA in December and said the two sides were waiting for a final signal from their leaders before signing the trade pact.
India’s commerce ministry officials said that Abdulla bin Touq Al Marri, UAE’s Minister of Economy and India’s Commerce Minister Piyush Goyal are expected to sign the much-awaited free trade pact after it is announced by the two prime ministers.
“Some elements will be the first of their kind for both countries,” said one official, who requested anonymity because he’s not authorized to speak on the matter. The free-trade agreement involved negotiations on trade in services and investment, plus other facets such as trade facilitation and customs cooperation, as well as competition and intellectual property rights.
The officials said the deal was a “landmark” agreement in the sense it was crafted in a way to help both economies. It is expected to create huge potential for business between the two countries, the ministry source said.
“Unlike previous deals the two governments have gone out of the way to accommodate industries in both countries to ensure that they also gain,” he said.
The UAE was India’s third-largest trade partner for the eighth consecutive year in 2020-21 with an estimated $60 billion in trade. Bilateral non-oil trade has grown from $185 million in 1985 to more than $43 billion last year.
The UAE is also India’s eighth-largest investor, with $11 billion invested between April 2000 and March 2021, while Indian firms have invested over $85 billion in the UAE.
Notably, UAE’s foreign direct investment into India jumped from $339 million in 2020 to $4.2 billion in 2021.
Ambassador Albanna said two-way investment between India and the UAE would get a further boost, as they are now strategic partners.
He said the UAE plans to invest a total of $75 billion in India to strengthen infrastructure.
With exports estimated at almost $29 billion in 2019-2020, the UAE is also India’s second-largest export destination after the United States.
“This deal is also crucial in the sense that it is expected to open a door for India to African countries, with which the UAE has signed significant trade deals,” the Indian ministry official said.
Quick Mutually Beneficial FTAs
The trade deal is expected to enable the two countries to boost bilateral non-oil trade to $100 billion in five years and increase services trade to $15 billion, resulting in more social and economic prospects in both countries.
The signing of a trade agreement often takes many months or even years but India and the UAE concluded the deal in about threee to four months. A joint communique will be released on the benefits of the FTA after the signing of the pact.
“It also removes doubts that India is strict on tariff barriers,” the ministry official said. “India is pro-trade and signed the deal in record three months, which proves that India is keen on signing mutually beneficial deals as quickly as possible.”
Negotiations started in October last year and the agreement was finalised by the end of December, the source said.
Albanna applauding the speed at which the two countries moved, noted that it “usually takes countries months and months, if not years and years.”
For India, this agreement is part of a strategy to enter into mutually beneficial trade deals.
Officials said Delhi is already working on similar deals with Australia, Canada, Taiwan, “and a few European countries.”
“Of these, the deal with Australia could be announced as soon as the end of March,” an official noted.
• Indrajit Basu