India trade deal generates huge export bonus for UAE

The UAE has seen its exports to India jumping by a whopping 65% just months after the two signed the comprehensive economic partnership agreement (CEPA) trade pact.

The value of these exports was $9.1 billion (R 724.16 billion) for the May-June period, the latest figures show.

India also made significant gains during the period, with its exports to the UAE rising by 16.5% to $5.27 billion (R 419.81 billion).

The CEPA bilateral free trade deal came into effect on 1 May, 2022.

The UAE’s exports of crude oil and gold grew substantially in the first two months, while cosmetics, essential oils, vehicles and tobacco products performed well for Indian exporters.

Dr Ajay Sahai, Director General and chief executive officer of Federation of Indian Export Organisations (FIEO), a leading trade body, said although overall Indian exports to UAE grew by only about 10% in May, the exports growth has been impressive in many sectors in the first month of the operation of the CEPA.

“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.

According to the data, oil imports were worth $2.9 billion of the $4.9 billion imports from the UAE in May alone. Non-crude imports from the UAE to India rose by 43% in the first of CEPA.

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.

 

Trade deal ‘pivotal for SMEs’

Ufku Akaltan, President for Indian Subcontinent, Middle East and Africa at UPS, said: “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.