CEPA and IMEC: Strengthening India-UAE Economic Relations for the Future

 


Indian EAM Dr S Jaishankar visited the UAE on 23 June 2024 to meet Sheikh Abdullah bin Zayed al Nahyan, the Minister of Foreign Affairs of the UAE. India and the UAE have made significant progress in the past four years. They launched the India-Middle East-Europe Corridor (IMEC). They have also signed the Comprehensive Economic Partnership Agreement (CEPA) in 2022. The agreement started trading with their currencies and linked UAE debit/credit cards with India’s Rupay network.

CEPA: A Promising Economic Partnership

The CEPA has greatly boosted trade between India and the UAE. Despite a global trade decline forecasted by the IMF in 2023, trade between the two countries grew by about 4%. CEPA removes tariffs on about 19,600 goods, across 18 commodity sectors and 11 service sectors. This benefits Indian goods worth $26 billion, which previously faced a 5% import duty in the UAE. Key sectors such as aerospace, metals, plastics, and jewellery have seen significant growth.

Expanding Services Trade

CEPA also aims to boost services trade to $15 billion by 2027. It covers 211 service sectors. The agreement allows UAE firms to compete with Indian firms for government contracts and public projects. Indian businesses can also fully own companies in the UAE, avoiding the need for local partners. This agreement improves market access by easing tax rates, land acquisition policies, and business visas.

Digital Trade and IMEC: Catalysts for Growth

CEPA includes digital trade cooperation to resolve connectivity and regulatory issues. The IMEC corridor, announced in September 2023 during the G20 Summit in New Delhi, is a key part of this. IMEC aims to enhance connectivity with interconnected energy grids, green hydrogen pipelines, and telecommunications infrastructure. This digital connectivity is vital for the economic visions and security of both India and the UAE.

Infrastructure Development and Regulatory Alignment

IMEC could improve physical connectivity infrastructure alongside regulatory changes and trade agreements. These covered energy grids, digital infrastructure, digital payments, and maritime infrastructure. These agreements align IMEC and CEPA, showing their combined potential.

Conclusion

CEPA has transformed the India-UAE partnership by removing tariffs on various goods and services and diversifying trade. This partnership, based on political trust, is expected to grow stronger under Prime Minister Modi's leadership. The IMEC corridor, focusing on infrastructure, digital connectivity, and regulatory frameworks, promises to create a smooth trade route between India, the Middle East, and Europe. The recent article issued on the same issue suggests that CEPA and IMEC are likely to increase trade volumes, market access, and economic growth for both India and the UAE. You can read the detailed article here.

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