Unlocking Opportunities for Logistics: India-UAE Comprehensive Economic Partnership Agreement Boosts Trade

The India- UAE Comprehensive Economic Partnership Agreement (CEPA), completed one year recently. The agreement aimed to grow the bilateral trade between the two countries to USD $115 billion in goods and services in the next 5 years.

This fastest executed bilateral trade agreement and the first of its kind in the MENA region has resulted in a growth of over 27% in trade, in the past 1 year itself, with significant growth in jewellery, car, and beauty products, aircraft and spacecrafts and exports of parts.

With India investing heavily in creating logistics hubs across the country, such bilateral trade agreements will significantly improve imports and exports of the country, thereby facilitating growth in the logistics sector.

Impact of the agreement on the trade relationship between India and the UAE.

The Comprehensive Economic Partnership Agreement (CEPA) is a comprehensive agreement that encompasses various aspects of India's economic relationship with the UAE, including trade, investments, healthcare, digital trade, government procurement, intellectual property rights, and more.

Trade agreements like CEPA are part of India’s ambitious plan to achieve a 5 trillion economy. These agreements will open doors to foreign markets for SME’s and enable disruption free movement of goods.

CEPA Impact

• It facilitates smoother trade between India and the UAE by significantly reducing tariffs on goods. As part of this agreement, approximately 80% of tariffs on goods moving between the two countries are lowered, with a commitment to eliminate all tariffs within a decade.
• CEPA gives easy access to SMEs in both countries within 11 service sectors and over 100 sub-sectors. This is a boon for both businesses and customers of both countries and a great growth opportunity.
• Since CEPA, there has been an exponential growth in sectors like gems and jewellery, cars and beauty products.
• It is anticipated that in the coming years there will be significant growth in trade in the pharmaceuticals, medical devices, and automotive sectors.
• As a result of CEPA, in anticipation of increased trade between the two countries, global shipping lines have launched new container services between India’s ports on the west coast and the UAE.
• This agreement has in a way complimented the initiation of several other significant partnerships that will boost the economy and business further. Eg: DP World launched the Dubai Incubator Center, in partnership with Invest India and the Start-Up Kerala Mission to encourage innovation across India’s logistics sector.

Role of Logistics in realising the opportunities presented by CEPA

The key to realising the opportunities provided by bilateral agreements like CEPA lie in establishing a seamless cross-border trade network, dependable logistics network and an ecosystem that empowers businesses.

UAE is India’s third largest trading partner and second largest export destination, accounting for 40% of India’s trade. It is only logical that we provide better access to our SMEs and markets to improve bilateral trade.

Industries such as pharmaceuticals need specialised logistics services and dependable temperature controlled supply chains for maximising business opportunities. It is important that logistics companies invest in such specialised service offerings.

Indian states have been working towards building logistical hubs across India to seize opportunities provided by the Gati-Shakti project of the Government of India. Such hubs with dedicated and quick service to countries like UAE will improve business access and help tap into the opportunities using growing economies of scale.

UAE is a major supply chain transit point and a gateway to the growing Arab and African countries. A strong and seamless logistics supply chain will enable Indian companies to better access these new markets.

Indian logistics companies need to invest in market access, establishing logistics partners and developing capabilities to serve gulf countries and beyond, especially in the sectors like pharma, automobiles, gems and jewellery etc. The case in point is the fact that within one year of CEPA, the value of non-oil bilateral trade has reached $49 billion, a 10 percent increase as compared to 2021.

The future landscape

With the Indian logistics market projected to reach a staggering $380 billion by 2025 and the freight and logistics market in the UAE expected to generate over $31 billion by 2026, the opportunities for growth and collaboration between India and the UAE are immense. The combination of robust logistics infrastructure, supportive free-trade policies, bilateral agreements, and increasing investments and trade links will undoubtedly have a profound impact on the trade dynamics between the two nations and the wider Gulf region. As the momentum builds and the logistics industry plays a pivotal role in facilitating seamless trade, both India and the UAE are poised to strengthen their economic ties and unlock new horizons of prosperity.