India-UAE CEPA — First-Year Trade Review and Strategic Significance
Summary
The India-UAE Comprehensive Economic Partnership Agreement (CEPA), which came into force on 1 May 2022, became India's fastest-negotiated free trade agreement — completing in 88 days.
●In its first full year, bilateral trade grew 16% to reach $85 billion, making the UAE India's third-largest trading partner and second-largest export destination.
●The agreement covers 97% of India's exports to the UAE with zero or reduced tariffs, includes digital trade provisions, and provides a services chapter covering 11 sectors.
●India's key exports — gems and jewellery, engineering goods, and pharmaceuticals — saw the highest growth.
Core Arguments
- 1
The India-UAE CEPA marks a strategic pivot in India's trade policy after a decade-long pause in FTA negotiations — the 88-day timeline signals political will at the highest level (PM Modi-MBZ relationship) and a recognition that missed trade agreements carry real economic costs.
- 2
The UAE functions as a strategic re-export hub — India's exports to the UAE include petroleum products and gems that are re-exported to global markets, meaning the CEPA's impact on Indian manufacturing is partially obscured by the transit trade dimension.
- 3
The services chapter is the agreement's unrealised potential — Indian IT services, professional services, and healthcare workers face persistent non-tariff barriers (credential recognition, visa caps) in the UAE despite the CEPA framework, suggesting that goods-led FTAs cannot solve services access without bilateral professional recognition agreements.
- 4
The gold and silver exclusion reveals the political economy of trade negotiations — India's gems and jewellery sector, a major MSME employer, feared that UAE gold (often of undisclosed origin) at zero duty would undercut domestic production and potentially facilitate gold-for-goods schemes that circumvent customs monitoring.
- 5
The I2U2 framework (India, Israel, UAE, USA) situates the bilateral CEPA within a broader quadrilateral economic architecture — the UAE as a Gulf financial hub, combined with Indian labour and technology, US capital, and Israeli agri-tech, represents a template for plurilateral economic cooperation distinct from traditional multilateral formats.
Dimensional Angles
Economic
Bilateral trade target of $100 billion by 2026–27 is achievable — the gap is primarily in services and in operationalising the Rupee-Dirham trade settlement mechanism to reduce dollar dependence in bilateral flows.
Political
India-UAE relations rest on personal diplomacy at the highest level — PM Modi has been conferred the UAE's highest civilian honour (Order of Zayed) three times, reflecting the strategic depth that enables fast-track economic agreements.
International Relations
The UAE CEPA creates a template for India's FTA negotiations with GCC (Gulf Cooperation Council) as a bloc — a GCC FTA would be India's single largest trade agreement by partner GDP.
Governance
Rules of Origin provisions in the CEPA are critical — the 40% local value addition requirement prevents third-country goods (particularly Chinese) from being routed through the UAE to access Indian markets at preferential rates.
Value-Adds for Answers
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Comparison: India's ASEAN FTA (2010) with 10 countries saw a significant import surge from China via ASEAN routing — the CEPA's stricter Rules of Origin provisions (40% local value addition vs 35% in ASEAN FTA) are a direct lesson from that experience.
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Remittance data: UAE is India's second-largest remittance source — ₹1.12 lakh crore in FY25, supporting 3.5 million Indian expatriate workers. The CEPA's social security framework (currently being negotiated) could portabilise pension benefits.
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Services gap: India's IT exports to UAE are only $5.2 billion despite the large Indian professional community — UK, Singapore, and Netherlands each receive more Indian IT services than the UAE, highlighting the underutilised services potential.
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Quote: Commerce Minister Piyush Goyal at the CEPA two-year review — 'The goods numbers are excellent. The services chapter is where our next focus must be — that is where the high-value jobs for India's young people will come from.'
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