India-UAE free trade agreement

Context: India has stepped ahead on a new journey with a renewed approach to indulge in Free Trade Agreements (FTA) with its trade partners.

The Shift in Approach

• With revamped objectives and renewed aspirations, India is eager to focus on gaining market access that shall facilitate the Indian industry’s integration into the global value chain.
• It has been iterated that the signing of FTA by India will no longer be confined within the intention to join a group but it will also address the new dynamics of international trade and the Indian economy.

Countries in focus

• Under the new FTA strategy, the Government of India has offered priority to six countries to deal with, among which the United Arab Emirates is at the top of the list for an early harvest deal.
• Other countries on the list include the United Kingdom, the European Union, Australia, Canada, Israel and a group of countries in the Gulf Cooperation Council.

Rays of Positivity

• The revisited and refurbished FTA strategy is a welcome move by India to promote its trade interests in important regions that will contribute to the overall economic growth.
• The fresh negotiations along with the government’s willingness to indulge in interim and mini-trade deals will provide impetus to the entire gamut of India’s trade.
• In September 2021, UAE expressed its intention to enter into bilateral economic agreements with eight countries and India was one among them.
• Over the progressive rhythm of time, UAE has emerged as a major economic hub in the world due to its strategic location. UAE, with its ‘Vision 2021’, has emphasized on diversification of its economy with enormous importance to the hydrocarbon sector followed by services and manufacturing.

Significance of this move

• The government hopes that the pact with the UAE will revive a long-shelved FTA with the Gulf Co-operation Council, a six-nation grouping of the UAE, Saudi Arabia, Kuwait, Bahrain, Qatar and Oman, and pave the way to markets in Africa, especially for India’s pharmaceuticals sector.
• With the UAE an important transit point for goods and people, this is not an unreasonable expectation, provided Indian industry, especially the ailing MSME sector, can live up to the potential offered by the FTA, and exports match imports.

Tales of India-UAE Relationship

• The diplomatic relationship between the two countries flourished in 1972.
• The relationship has been boosted with the visit of the Indian Prime Minister to UAE in 2015 that marked the onset of a strategic partnership between the two countries.
• The Crown Prince of Abu Dhabi was invited as the chief guest at the Republic Day celebrations of 2017 transforming the bilateral relationship to a comprehensive strategic partnership.
• In September 2021, the India-UAE comprehensive economic partnership agreement was launched.

Time has witnessed the deepening of India’s trade relations with the UAE. This makes UAE the third-largest trading partner of India.

• With the new FTA, this relationship will be further strengthened.
• This will be an enabler of two-way investment that is anticipated to benefit India’s export targets.
• UAE offers an attractive market for Indian electronics, automobiles and other engineering products.
• This partnership will also invite multinational investments from other geographies that will expand the business of both India and the UAE.

Suggestion

• Despite the existence of a number of positives arising from the new FTA, the complicated tariff structure of UAE which is in compliance with the GCC norms, needs to be addressed and negotiated in order to assist the Indian exporters.
• Therefore, it is suggested that the FTA agreement must try to introduce more transparency and predictability in terms of Non-Tariff Barriers to ensure a less cumbersome compliance procedure.

Road Ahead

• Transparency and Predictability in UAE’s Non Tariff Barriers (NBT) are required and should be specified by the FTA for a less cumbersome compliance procedure that will facilitate the exporters of India.