The UAE will extend zero duty access to 90 per cent of goods exported from India from the first day of implementation of the India-UAE Comprehensive Economic Partnership Agreement (CEPA), possibly in April or May this year, widening market opportunities for a large number of labour-intensive sectors including garments & textiles, gems & jewellery, engineering items, plastic products and pharmaceuticals. The CEPA, signed by Commerce and Industry Minister Piyush Goyal and his UAE counterpart Abdulla bin Touq Al-Mari on Friday, seeks to increase bilateral trade to $100 billion in five years time, and is likely to create an estimated 10 lakh jobs in India.

India’s part

India, on its part, will eliminate tariffs on about 65 per cent of tariff lines on the first day of implementation and has also agreed to give the UAE a tariff rate quota in gold imports that would allow 200 tonne of gold to be imported every year with a one per cent concession in import duties, said Commerce Secretary BVR Subrahmanyam at a press briefing on Saturday. The free trade pact will be further deepened over the next decade with the UAE set to eliminate import duties on 97 per cent of tariff lines in the next five years while India will bring down tariffs to zero on 90 per cent of items over ten years. “The economies of India and the UAE are complimentary to each other. What they make we don’t and what they make we don’t. So it is a win-win situation,” Subrahmanyam said. India will, however, continue to insulate 10 per cent of tariff lines, identified as sensitive items, from duty cuts as it could hurt the economy and livelihoods, the Secretary pointed out. The sensitive items include dairy, fruits & vegetables, cereals, automobiles, auto parts, coke, dyes, soap, food preparation, toys, natural rubber, tyre, footwear, plastic, medical devices and copper. The UAE is India’s third largest trading partner after the US and China and a major exporter of oil to the country. Bilateral trade was at about $60 billion in the pre-pandemic year of 2019-20. It had fallen to $43 billion in 2020-21 hit by the Covid-19 but is recovering again with total trade in April-October 2021 period at close to $40 billion.

Biggest gain

One of the biggest gain for India in the FTA was that UAE was giving duty free access to its market for domestic jewellery, the Commerce Secretary said. There was a five per cent duty on Indian jewellery and now, it is being reduced to zero opening huge opportunities, he said. The same is true for a number of other setors such as the apparels and textiles sector which had a 5 per cent duty disadvantage compared to smaller economics such as Bangladesh and Vietnam that were getting duty free access in the UAE. “With India supplying $1,515 million of apparel to the UAE as against its total imports of $3,517 million, Indian apparel exports contribute a decent share of 43 per cent. The trade pact would result in a drop of 5 per cent import duty for Indian ready made garments further strengthening its dominant position,” said Narendra Goenka, Chairman, Apparel Export Promotion Council. The UAE has been the third largest export destination for engineering items despite the constraint of average 5 per cent import duty on them, pointed out Mahesh Desai from the EEPC. “With the duty now coming down to ‘zero’ we see the share of engineering goods in UAE’s total import increasing at a fast pace,” said Desai.