India and the UK are expected to sign a comprehensive free trade agreement later this month (September 2022), while negotiations with Canada for a similar arrangement are also ongoing.
India recently signed trade agreements with the UAE and Australia, and as well as the pending Canada and UK deals, India is keen to improve its trading relationship with the US, the government said.
Addressing an event hosted by the US–India Strategic Partnership Forum, India’s Commerce and Industry Minister Piyush Goyal said that under the free trade agreements, two trading partners “reduce or eliminate customs duties on the maximum number of goods traded between them. Besides, they liberalise norms to enhance trade in services and boost investments.”
He also said both the governments of India and the US are looking to strengthen economic relations and strategic partnerships, adding that “the strong bond with the people of the US will transcend into business and government rapidly”.
And the minister predicted that India is on course to becoming a $30 trillion economy within next 25-30 years.
The comprehensive economic partnership agreement (CEPA) trade pact with the UAE, which came into effect on 1 May 2022, is already paying dividends. India has seen its exports to the emirates rise by 16.5% to R419.81 billion ($5.27 billion).
The UAE has seen its exports to India jumping by a whopping 65% just months after the two signed the CEPA deal. The value of these exports was R725 billion ($9.1 billion) for the May-June period, the latest figures show.
Dr Ajay Sahai, Director General and chief executive officer of Federation of Indian Export Organisations (FIEO), a leading trade body, said though the overall Indian exports to UAE grew by only about 10% in May, the exports growth has been impressive in many sectors in the early days since CEPA was signed.
“Since the industry will take some time to exploit the potential offered by the CEPA, we expect exponential growth in our exports – and imports – from UAE as compared to our overall exports,” Sahai told the Arabian Business website. “We are looking to breach $100 billion of bilateral trade in next three years,” he said.
The surge in exports from the UAE pushed its trade gap with India to almost $.3.9 billion during May-June 2022, but Sahai said this was not a major concern as India largely imports raw materials from the emirates.
The trade deal with the UAE, a key energy supplier and a significant market for Indian goods, will offer long-term benefits to India, Sahai said.
Indian vehicle exports to the UAE surged by a whopping 192 percent in May, followed by footwear exports (73%), gems and jewellery exports (33%), tea, coffee, and spices (50%) and ready-made textiles (42%).
Senior officials at the FIEO trade body said exporters expect India to sell $40 billion of goods to the UAE in the current fiscal year, a rise from $28 billion in FY22.
The free trade agreement saw the scrapping of duties on around 90% of India’s exports in value terms to the UAE, covering sectors including gems and jewellery, textiles, leather and engineering goods. India has extended a 1% duty concession for gold imports from the UAE for up to 200 tonnes of inbound shipments under the trade pact.
India also agreed to significant tariff cuts on dates, petroleum products, petrochemicals, metals, and minerals to the UAE.
The CEPA deal, which was negotiated in record 88 days, was signed on 18 February this year
Ufku Akaltan, President for Indian Subcontinent, Middle East and Africa at UPS, said: “In addition, CEPA is likely to prove pivotal as a platform for small and medium sized business (SMBs) in both countries to expand internationally by granting them access to new customers, networks, and avenues of collaboration.
The CEPA agreement covers 11 service sectors and more than 100 sub-sectors, including business services, professional services, accounting, real estate, advertising, communications, building and construction, related services, educational services, environmental services, financial services, insurance, social and health services, and travel and tourism service.
The UAE’s small business will have vastly improved access to India’s huge consumer market, according to the World Economic Forum. It forecasts that in India nearly 80% of households in 2030 will be in the middle-income bracket, up from about 50% today, and they will be responsible for 75% of consumer spending in 2030.