India is working on an ambitious plan to more than double its exports to the UAE – its largest trading partner in the GCC region – in the current fiscal year, as the South Asian country continues negotiations to finalise a free trade agreement (FTA) with the Gulf country, officials handling India’s trade said.
India will also be looking to attract increased investment from the UAE, especially from the country’s sovereign wealth fund, to pay for some of the government’s flagship programmes to promote manufacturing in certain identified sectors.
India’s federal commerce and industry ministry has set a target of a 110 percent growth in its exports to the UAE at $35 billion in fiscal 2021-22, according to official sources.
Dr Ajay Sahai, director general and chief executive officer of Federation of Indian Exporters (FIEO), India’s apex export promotion body
“India’s exports to the UAE, which has seen a decline in the last two years after the imposition of value added tax (VAT) by the latter, has registered a robust growth in the April-June quarter of this year, with some of the sectors such as apparel clocking 65-70 percent growth in the quarter,” Dr Ajay Sahai, director general and chief executive officer of Federation of Indian Exporters (FIEO), India’s apex export promotion body, told Arabian Business.
“Going by the current trend, and with the support of the top leadership of both India and the UAE, we are confident that the trade between the two countries can be significantly increased in the current fiscal year and also going forward,” Sahai said.
Sahai added the proposed FTA with the UAE will act as a major catalyst for catapulting the bilateral trade to far higher levels and also will be a win-win for both countries.
“We are given to understand that the negotiations [for the FTA with the UAE] are in advanced stage now and the government is working to finalise it in the current fiscal year itself,” said the apex trade promotion body top official.
Under the FTA mechansim, two trading partners significantly reduce or eliminate import or customs duties on the maximum number of goods traded between them.
Sahai said the proposed FTA with the UAE will be much more than for promotion of bilateral trade as it would seek to set ambitious targets to promote services as well as investments between the two countries.
“It [the proposed FTA] will go beyond the usual trade, IT (information technology) and man power areas and could be seriously looking at value added services in many sectors and also seeking to attract increased investments,” he said.
“India has been unveiling a series of initiatives to strengthen the domestic manufacturing sector, with the launch of production linked incentive (PLI) schemes in certain select sectors. The UAE, which makes significant investments in overseas markets through its sovereign wealth fund, can be a big source for investments in these sectors,” Sahai said.
“Given the current strong and strategic relationship at the top leadership level between India and the UAE, the bilateral ties are set to cover many more areas than the traditional trade relations,” he said.
The Indian government has identified nine sectors, including electronic or technology products, pharmaceuticals drugs, telecom and networking products, food products and high-efficiency solar PV modules for promotion of manufacturing through the PLI scheme.
Overall UAE-India trade stood at $59.11bn in 2019-20 – posting a marginal 1.34 percent decline over the previous year – with exports from the UAE running to $30.26bn and India’s exports to the former running to $28.85bn.
Gold is among India’s major import items from the UAE.
India’s overall trade with the UAE, however, declined in FY2020-21 due to the coronavirus pandemic.
India’s major import items from the UAE include crude oil and petroleum products, gold, minerals, chemicals and wood and wood products, while its export basket to the Gulf country include electric equipment, gold jewellery, plastic, iron and steel, prefabricated building material, essential oil, rubber articles, dairy products, organic food and medical equipments.
India and the UAE have decided to work on a separate free trade pact, after the India-GCC FTA talks, which started in 2004, were suspended in 2008.
Official sources said India is also looking to subsequently revive the talks with GCC for a larger FTA pact.
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