Context: India and the United Arab Emirates (UAE) have formally launched negotiations for a Comprehensive Economic Partnership Agreement (CEPA) aiming to conclude them by the year-end.
About Comprehensive Economic Partnership Agreement

• It is a kind of free trade pact which covers negotiation on the trade in services and investment, and other areas of economic partnership. It may even consider negotiation on areas such as trade facilitation and customs cooperation, competition, and Intellectual Property Rights.
• Partnership agreements or cooperation agreements are more comprehensive than Free Trade Agreements.
• CEPA also looks into the regulatory aspect of trade and encompasses an agreement covering the regulatory issues.
• India has signed CEPAs with South Korea and Japan.

Key highlights

• Both countries expected to reach a mutually beneficial economic deal by building on the progress made under the Comprehensive Strategic Partnership signed in 2017.
• Both India and UAE ministers emphasized that CEPA will create new jobs, raise living standards, and provide wider social and economic opportunities in both nations.
• CEPA will enhance bilateral trade and investment flows and it will assist in  post-COVID economic recovery and future economic growth.
• The two sides will identify the focal point within the discussion of the free trade agreement and the early harvest component. 
• Both ministers emphasised that CEPA will create new jobs, raise living standards, and provide wider social and economic opportunities in both nations.

Significance: A new strategic economic agreement is expected to increase bilateral trade in goods to $100 billion within five years of the signed agreement and increase trade in services to $15 billion.

Background of India-UAE relations

• India and the United Arab Emirates (UAE) established diplomatic relations in 1972. UAE opened its Embassy in Delhi in 1972 & India opened its Embassy in Abu Dhabi in 1973.

About recent Economic relationships  

• UAE is currently India’s third-largest trading partner with bilateral trade in 2019/2020 valued at USD 59 billion. 
• The UAE is also India’s second-largest export destination after the US, with exports valued at approximately USD 29 billion in 2019-2020. 
• India was the UAE’s second-largest trading partner in 2019, with bilateral non-oil trade valued at USD 41 billion. 
• The UAE is the eighth-largest investor in India, having invested USD 11 billion between April 2000 and March 2021, while investment by Indian companies in the UAE is estimated to be over USD 85 billion. 
• India’s major exports to the UAE include petroleum products, precious metals, stones, gems and jewellery, minerals, food items such as cereals, sugar, fruits and vegetables, tea, meat, and seafood, textiles, engineering and machinery products, and chemicals. 
• India’s top imports from the UAE include petroleum and petroleum products, precious metals, stones, gems and jewellery, minerals, chemicals and wood and wood products. India imported USD 10.9 billion of crude oil from the UAE in 2019-2020