India’s closer engagement with UAE is a win-win situation for both

The CEPA’s larger significance is that it serves as a template for an FTA with the Gulf Cooperation Council (GCC) whose members include Saudi Arabia, Kuwait, Oman, Qatar and Bahrain, writes N. Chandra Mohan for South Asia Monitor

N Chandra Mohan Feb 20, 2022
PM addressing at the India-UAE Virtual Summit, in New Delhi on February 18, 2022 (Photo: PIB)

India signed a Comprehensive Economic Partnership Agreement (CEPA) with the United Arab Emirates (UAE) on February 18, reflecting a deepening strategic partnership between the two nations. This deal comes after India inked a CEPA with Mauritius in early 2021 for trade in a limited set of goods and services. 

The agreement with the UAE, however, is much deeper and ambitious in scope as India can export 90 percent of its products once it comes into effect. A permanent safeguard mechanism is also in place to check misuse of the agreement. This CEPA aims to step up bilateral trade to $115 billion within five years, of which $15 billion is in services export, up from $52.8 billion in the current financial year (April-December).

The UAE is India’s third-largest trading partner after China and the US. The Emirates is also India’s second-largest export destination, with outbound shipments worth $20 billion or 6.6 percent of total exports. 

With India’s imports of $32.7 billion driven largely by oil, the balance favours the UAE at $12.7 billion. 

India-UAE trade 

The bulk of trade between the two nations is of petroleum and gems and jewellery. India hopes to step up textile exports as the UAE is the third-largest re-export market. Plain and studded gems and jewellery exports could also increase substantially to $10 billion by 2023 and double thereafter in the next five years. India has identified 1,000 products like leather, spices, engineering goods, chemicals and poultry for duty concessions from the UAE.

In a first of its kind, the CEPA includes a digital trade element to enhance bilateral cooperation in paperless trading, digital payments and online consumer protection. Another first is that Indian drugs approved by regulators in advanced countries can be sold within 90 days of application. The economic engagement would increase manifold when two-way investment flows pick up. Bilateral investments are estimated at $57 billion between 2003 and 2021, of which 54 percent is India’s FDI according to a KPMG-IBPC report. 

The CEPA proposes an investment zone in India for UAE firms and a dedicated India Mart in the Jebel Ali Free Zone. There is a pledge to create opportunities for Indian investors in advanced industrial technology zones in Abu Dhabi. 

A key driver in the economic partnership is the 3.4 million-strong Indian Diaspora in the UAE, which has strong business links with the home country. The profile of the community has also changed away from blue collar workers who built the infrastructure. Now, 35 percent are professionally qualified, businessmen and other white collar non-professionals. Total cumulative investments in the UAE by NRIs are $55 billion, with investments by the 70 richest Indians based in the UAE is valued at over $8-9 billion. 

More than 30 percent of the start-up community in Dubai is represented by Indians, according to the KPMG-IBPC report. Affluent Indians are also locating in Dubai attracted by Golden Visas which provide a 10-year residence permit.

CPEA with GCC 

The CEPA’s larger significance is that it serves as a template for an FTA with the Gulf Cooperation Council (GCC) whose members include Saudi Arabia, Kuwait, Oman, Qatar and Bahrain. India thus will have larger access to West Asia and Africa as the UAE has no customs barriers with GCC members. To be sure, India sought to have a framework agreement with the GCC way back in 2004. There were two rounds of discussions in 2006 and 2008 but the talks did not fructify.  

But there is bound to be a renewed impetus to clinch a free trade agreement with the GCC as India has strengthened ties with Saudi Arabia during the last decade. The kingdom is one of the largest suppliers of energy to India, accounting for 18 per cent of oil imports and 30 percent of its LPG requirements. The kingdom is the fourth largest trade partner of India and India is its second-largest partner after China. For such reasons, India’s larger engagement with GCC has already acquired critical mass to materialize into another CEPA or FTA in the coming months. 

The upshot is that the CEPA with the UAE is a win-win deal for both nations. If India hopes to access the wider West Asian and African markets, the UAE looks at India as a gateway to Asia. One thing that is common to both the UAE and Saudi Arabia is that they are looking to a future beyond oil. Accordingly, while the UAE’s sovereign wealth funds will definitely invest more in India, the future areas of cooperation will be in areas like clean energy. To boost cooperation on climate change actions, both India and the UAE agreed in the CEPA to set up a joint hydrogen task force to scale up technologies. 

Stepping up bilateral trade is mutually beneficial as gains include employment generation of as much as 1 million jobs in India and 100,000 in the UAE. 

(The author is an economics and business commentator based in New Delhi. Views are personal. He may be contacted at

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