As it happened: UAE-India sign historic trade deal, what top NRI businessmen think about it

The CEPA (Comprehensive Economic Partnership Agreement) between the UAE and India is set to further strengthen the existing $60 billion plus trade relationship between the countries. The deal was signed during a virtual summit in the presence of His Highness Sheikh Mohamed Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of UAE Armed Forces, and Narendra Modi, Prime Minister of India.

Check out the updates with comments from top Indian businessmen here:

60 days to come into effect

CEPA confirmation in both countries will probably take 60 days – May 1 could be when the CEPA comes into effect, says Piyush Goyal, Indian Minister of Textiles, Minister of Commerce and Industry and Minister of Consumer Affairs, Food and Public Distribution.

Both countries have made duty “concessions”, said the Indian minister. “It’s a very balanced agreement…” he said.

Sensitive goods

While 80 per cent of goods will get tariff concessions, the remaining 20 per cent remain protected because these are “sensitive to both countries”. But even then, some of these could still see duty removals in a phased manner, the Indian minister said.

India to host UAE officials

India will host UAE Government officials for round-table meetings with businesses in the country, said Goyal. This would be in the first week of May.

Ease shipping costs across the board

The duty exemptions will work to the advantage of importers in both countries. The CEPA deal will extend tariff concessions to up to 80 per cent of the goods that make up the trade volumes between the countries.

“In the recent past there had been a tremendous increase in shipping freight charges for goods from India,” said Dr. Dhananjay Datar of Adil Trading. “On this historic occasion, these issues have been addressed and reasonable solutions provided. As an exporter of Indian foodstuffs, any reduction in shipping and customs costs will pave the way to India becoming the largest trade partner of this country,” he said.

Gold and jewellery sector to benefit

Gold and Jewellery sector of India will be a major beneficiary from CEPA.

Crucial to steel sector

CEPA deal also extends to steel production and exports, freeing the industry from any “unnecessary surcharges”, says Piyush Gyal, Indian Minister of Textiles, Minister of Commerce and Industry and Minister of Consumer Affairs, Food and Public Distribution.

According to Bharat Bhatia, Founder & CEO of Conares, which has steel mills in Dubai, “The trade agreement between the UAE and India would massively benefit that steel and other metal commodity trade exploring the best opportunities to develop between the two countries. As I understand the steel manufacturers in both countries will be benefited helping them build a healthier and long-term relations. The current duties in the UAE customs are 5 per cent and on some products, it is 15 per cent.

“Trade agreements like the CEPA facilitate further investments between the two countries which benefits everyone. We have plans to explore the possibility of investing backward integration in steel making in India. This new trade deal between the two nations creates new opportunities for us to expand our footprint in India.”

One million jobs

There will be “one million job opportunities” as the CEPA deal pushes UAE-India trade to $100 billion, says minister Piyush Goyal.

CEPA is a “complete economic partnership, finalized in the shortest time,” Goyal added.

Duty changes

Up to 80 per cent of goods will see duty changes as a result of UAE-India CEPA deal. The deal will take bilateral trade past $100 billion in 5 years, says UAE Minister of Economy Abdulla bin Touq Al Marri.

“This will lead to a stable trade environment…” he added.

Momentous chapter

“UAE and India are entering a momentous chapter in our shared history,” says UAE Minister of Economy Abdulla bin Touq Al Marri. “India was the first country we reached out to,” for resetting trade alliances in a changing global economy, says Minister.

Commemorative stamp issued

A commemorative stamp is being issued by the leaders of the UAE and India.

‘A shared vision of future prosperity for all posterity’ – that seems to be the main theme the CEPA deal is delivering. With emphasis.

The deal would place the two countries at the ‘heart of global trade’.

Mutual take-off

India and UAE are poised for a 'mutual take-off' and create hundreds of thousands of jobs with the CEPA deal.

These are the targets - $100 billion in trade of goods and $15 billion via services.

Narendra Modi speaking at virtual summit

“Both our nations are open to working with other partners – US, Israel – on technology, innovation and finance…” said Modi.

Entering a golden era- Piyush Goel

UAE-India sign the deal

Piyush Goyal signed the CEPA deal with the UAE Minister of Economy, Abdulla Bin Touq. This culminates a journey that began in 2015 with the visit of Prime Minister Modi to the UAE.

“Sky is the limit…” says Piyush Goyal as UAE and India sign what will be an epoch-making trade and economic deal.

Medical education – why not?

There have been some attempts in the past to rope in Indian expertise in the medical education field into the Gulf. Faculty-level alliances were mentioned as possibilities, but nothing much came of them.

Now, with all the pandemic lessons fresh in everyone’s minds, the CEPA deal could be used to revive those efforts. “Medical education – and more of it – is a requirement for UAE and GCC countries,” said Dr. Moopen. “Capacity needs to be built immediately and significantly.

“This is a space ideal for Indian investors with the right credentials to tie up with healthcare investors or government schemes to build the medical colleges for the UAE and GCC’s future. The next generation of talent for the healthcare sector needs to be home-grown. It’s as important as adding hospitals and clinics.”

Will India’s healthcare get the full treatment from CEPA?

In the months leading up to the deal being announced, there was speculation build up whether healthcare and pharmaceuticals would have an elevated status in the trade and investment flows.

“It may be difficult for new entrants from India to build a presence in the UAE, because this sector is saturated in terms of capacity,” said Dr. Azad Moopen, Chairman and Managing Director of Aster DM Group, which apart from its hospitals and clinics in the UAe has also invested around Rs30 billion on its in-India network.

Funding from UAE in India’s Tier 2/3 cities

According to him, healthcare investments from the UAE to India would make better sense. “India’s healthcare space is still struggling with capacity needs,” Dr. Moopen said. “If the UAE could consider some of its planned India funds into developing healthcare facilities in Tier 2 or Tier 3 cities, it could ease capacity constraints. If these funds can be provided on preferential terms, it would be even better.”

Duty-free exemptions to Indian exports

Based on the latest figures, UAE investments in India is around $17 billion or so, of which $11.67 billion is in the form of foreign direct investment. The rest of the fund inflow into India UAE is as portfolio investments. This makes the UAE the ninth biggest source of FDI for India.

In the last two years, UAE sovereign wealth funds have gotten real busy in this space, most notably raising their exposure in Reliance Industries of Mukesh Ambani.

According to Raju Menon, Chairman and Managing Partner of the audit firm Kreston Menon, the UAE-India CEPA sign-off will set the template for India’s other upcoming trade deals.

“These are partnerships done with an eye on the future,” he said. “The UAE and India are also aiming to strengthen their partnership in start-ups, fintech, AI, security and renewable energy.

“The UAE will be keen to invest in ports, railways and the industrial corridors in India. The fact that almost 80 per cent of India’s exports to UAE will be duty-free is the biggest advantage.”

What will be different

What will be different about CEPA is that it will add to an already well-established base of trade and investment flows going in both directions. According to a new report from IBPC (Indian Business and Professional Council) and KPMG, the combined investments by NRIs in the UAE are estimated at around $55 billion. Of this, 70 of the wealthiest Indians based in the country have channelled in $8 billion to $9 billion.

These days the nature of the investments too are changing. While real estate remains a favoured choice for Indian investments, the latest entrants also take the shape of ‘unicorns’. Cars24, a digital platform for pre-owned cars, launched its operations in the middle of last year and then closed the year by being involved in one of the biggest commercial leases in Dubai, which was for a facility in Jebel Ali Free Zone.

According to Rizwan Sajan, Chairman of Danube Group, the CEPA deal will bring about a shift in NRI investment attitudes – of looking at both UAE and India as equal opportunity markets. “We are more than ready to fill the gap and tap into opportunities in India – be it in real estate, construction, energy, infrastructure, healthcare or retail,” he said. “Many of us – NRI entrepreneurs who made it big in the UAE – would now like to expand into the growing Indian market and help our economy by investing and creating jobs.”

Immediate impact

The immediate impact of the CEPA agreement will be felt in select sectors, with energy, manufacturing gold and jewellery, and pharmaceuticals expected to figure prominently. It is felt that the full benefits of the duty exemptions and cuts will then be extended to other sectors as the CEPA benefits flow wider.

Could this also be the platform for UAE-India alliances to think beyond traditional sectors?

No doubt, many new avenues of collaborations will open, and this will benefit businesses from both countries,” said Yussufali M.A., Chairman of LuLu Group and Vice-Chairman of Abu Dhabi Chamber of Commerce. “And even beyond as UAE is a key gateway to the entire Middle East and Africa.”

This is the theme that Indian businessmen based in the UAE are talking up – that if India’s manufacturing base needs to tap new markets in a most cost efficient manner, then doing so through the UAE provides the best route.

“DP World operates some of the key ports in India – so, from a factory in India to shipping it out to a client anywhere in the world becomes a possibility,” said a senior source in the logistics business. “The pandemic has shown the need to think different about supply chains. And Indian manufacturers should also consider UAE as the springboard for a much wider marketplace, and not just the other Gulf markets.”

What is the wider goal of the deal?

Develop the trade relationship into a $100 billion status – and even go all the way to $115 billion – in the next five years. India is currently the third biggest trade partner for the UAE, and it is felt that with the new deal, there will be a scaling down of import duties to improve ease of access of goods and services.

Ahead of the CEPA deal being signed, Abdullah Bin Touq, UAE Minister of Economy, Dr. Thani Bin Ahmed Al Zeyoudi, UAE Minister of State for Foreign Trade, and Piyush Goyal, Minister of Commerce and Industry in the Indian Government, will deliver opening remarks.

For India, this is the first trade deal signed by the NDA Government, which is now working on multiple CEPA-linked alliances with key trade partners, including the UK. India will be aiming for progress in shipping more of its pharmaceutical products – leveraging its manufacturing strengths in generic medicines – to the UAE.

The deal, according to trade analysts, will set up a windows of opportunity for anything with a ‘Made in India’ stamp. For the UAE, it would mean having a partner that could play a fairly integral part to the country’s ambition ‘Operation 300Bn’ industrial progamme.

The deal will officially come into effect from April, 2022.