Golden Age beckons

The CEPA heralds a new era in the UAE-India relationship by boosting trade ties and cutting import duties that will benefit both nations

India and the UAE established diplomatic ties in 1972 with the setting up of the UAE’s embassy in New Delhi. India reciprocated by opening its embassy in Abu Dhabi in 1973. However, the relationship between the two predates this — their trade links date back centuries. Initially, the trade was dominated by commodities such as dates, fish, and pearl. Subsequently, hydrocarbons entered the picture with the discovery of oil and the start of its export by Abu Dhabi in 1962. In the 1970s, UAE-India trade grew to around $80 million per year.

Trade between the UAE and India increased significantly in the 1990s when the UAE became a major regional trading hub and India embarked on its landmark economic reforms. UAE-India trade rose to a staggering $60 billion in 2020. The UAE is now India’s third-largest trading partner, while India is the UAE’s second largest after China.

The following key facts explain the strong trade and economic relations between UAE and India:

The UAE mainly exports petroleum and petroleum products, crude oil, minerals, jewellery, gems, and chemicals.

The UAE has mainly invested in the services, transportation, power, and construction sectors in India. Several UAE companies have invested in India, key amongst them being DP World, Emaar, Mubadala, ADIA and the Lulu group.

The key export items from India to UAE include petroleum products, food items, textiles, minerals, jewellery, precious metals, etc.

India’s investments in the UAE are in the real estate, retail, trade, manufacturing, transportation, construction, logistics, insurance, and finance sectors. Many major Indian corporates and financial institutions have offices and operations in the UAE. Indian companies are estimated to have invested over $85 billion in the UAE.

The Comprehensive Economic Partnership Agreement (CEPA)

Several agreements have been signed between the UAE and India in the last few years to bolster the trade and economic relations. The most recent is the landmark Comprehensive Economic Partnership Agreement (CEPA) which will help bilateral trade grow from $60 billion now to $100 billion in the next five years. Besides, it is expected to grow trade in services to $15 billion.

CEPA will cut import duties across a wide range of products and boost trade. It will especially benefit labour intensive industries. Both India and the UAE stand to benefit from the agreement. For example, while India offers tariff rebates to the UAE on gold, the UAE eliminates tariffs on jewellery.

Besides improving bilateral trade, which forms the backbone of the UAE-India relationship, the CEPA heralds a new age of cooperation. The agreement will strengthen the overall relationship and pave the way for collaboration on several important fronts such as sustainability, security, digitalisation, and energy security.

The way forward for the UAE-India relationship

There are several opportunities for collaboration in sectors such as petrochemicals, renewable energy, real estate, education, transportation and defence. While such collaborations will help the UAE engage with one of the largest and fastest growing global economies, it will also provide

India with new opportunities for investments. The economic vision shared by both the UAE and India will ensure that this age-old relationship grows from strength to strength.

To know more, get in touch:

Email: uae@mbgcorp.com; WhatsApp/Call: +971-526406240

Visit: www.mbgcorp.com/ae

Shailendra Ranjan is Director - Business Advisory at MBG Corporate Services