Home / News / India /  Roaring trade: India-UAE FTA utilization surges in Dec

Abu Dhabi/ New Delhi: Exports benefiting from the India-UAE free trade pact accounted for about 60% of New Delhi’s total non-oil shipments to Abu Dhabi in the December quarter, as against 22% in the July-September period, signifying a sharp pickup in the utilization of the pact, according to data indicated by certificates of origin, reviewed by Mint.

COOs, which are mandatory to claim duty concessions under bilateral free trade agreements (FTA), may relect into actual exports with a lag, and are a strong indicator of the utilization of the pact.

India’s outbound shipments under the comprehensive economic partnership agreement (CEPA), which came into effect on 1 May, had exceeded $5billion by December, while overall duty concession benefits stood at $254 million, according to government data. Non- oil data is being considered for comparison as oil is not part of the comprehensive FTA.

This is about one-third of the non-oil exports to the Gulf nation, with key sectors such as textiles, gems and jewellery, electrical machinery, and automobiles, enjoying zero-duty access.

“Significant duty benefits are accruing to Indian exporters under the CEPA. This is a source of competitive advantage for exports to the UAE. CEPA utilization is on an uptrend and is likely to increase further," said a commerce department official, seeking anonymity.

“Dedicated efforts are being made by the department of commerce to raise awareness. Regular industry interactions and continuous end-to-end hand-holding is being done to assist Indian exporters in leveraging the CEPA," the official added.

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During October-December, 17,005 COOs worth $3.33 billion were issued to exporters against $5.45 billion worth of non-oil exports in the quarter. In July-September, 12,875 COOs worth $1.31 billion were issued against $5.83 billion worth of non-oil exports.

In December, 6,111 COOs worth 1.1 billion were issued, nearly three times the 2,316 COOs worth $310 million in June. COOs issued in December were led by textiles with certificates worth $303 million, followed by gems and jewellery at $185 million, edible fruits and nuts at $90.61 million, live animals at $88.09 million, automobiles at $38.79 million and footwear at $36.34 million.

A COO issued to an Indian exporter certifies that the goods have met certain criteria considered as originating in India.

The pact lists 17 agencies from India other than and the Export Inspection Council (EIC), including the spices, coir and tobacco boards, to issue certificates of origin to exporters digitally, facilitating faster clearance and trade. India’s overall non-oil exports to the UAE fell by 12% in December to $1.9 billion, indicating muted global demand amid recession fears.

The UAE is a trans-shipment hub. However, looking at the June-December period, while India’s global exports grew by 3.07% to $249.43 billion, exports to the UAE were up 11.2% to $17.75 billion.India’s global non-oil exports fell 2.75% in the June-December period to $197.98 billion, while exports to the UAE expanded by 4.6% to $13.34billion, the data showed.

“It shows that the India-UAE CEPA is acting like a cushion amid subdued global demand, and the robust data on issuance of COOs only validates it," said another government official also seeking anonymity.

The pact immediately eliminated duties for 90% of India’s exports to the UAE by value and covered sectors such as gems and jewellery, textiles, leather and engineering goods.

Gems and jewellery, electrical machinery, automobiles, cereals, and machinery and mechanical appliances were the top gainers of CEPA by value, posting export growth of 18%, 28%, 35%, 39% and 17% respectively. Other high-growth sectors include sugar and sugar confectionery, tea and spices, essential oils, miscellaneous chemicals and man-made staple fibres at 70%, 49%, 43%, 43% and 54% respectively.

Meanwhile, iron and steel exports to the UAE reported a 39% decline in the December quarter to $646 million. Officials said this is set to grow considering that the export duty was withdrawn in November.

Besides, there has been a sharp rise in India’s iron ore exports after the government withdrew the export duty on steel and iron ore. Exports of iron ore and chemicals to China jumped over 10 times to $153 million in December from $14.26 million in November when the government withdrew the export duty.

The agreement, negotiated in a record 88 days, was signed on 18 February. This is the first major bilateral free trade pact signed by the Narendra Modi-led government and is likely to benefit $26 billion worth of Indian goods that were subjected to a 5% import duty by the UAE.

Dilasha Seth
" Dilasha Seth is a journalist reporting on macroeconomic policy for the last 11 years. She writes extensively on issues including international trade, macroeconomic data, fiscal policy, and taxation. At Mint, she reports on trade deals that India is signing besides key policy decisions of the Ministry of Finance. She closely tracked and covered the transition to the goods and services tax (GST) regime in 2017 and also writes on direct tax-related issues. In the past, she has worked with Business Standard and The Economic Times. She is based in Bangalore."
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