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India’s export of non-petroleum products to UAE underperform after FTA, data reveals

Non-petroleum exports to the United Arab Emirates (UAE) gained only 4.5 percent during the May-July period — the first three months after the trade agreement with the West Asian nation went into effect — despite overall outbound shipments to the country increasing by almost 16 percent to $8.09 billion, according to commerce and industry ministry data.

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New Delhi: Non-petroleum exports to the United Arab Emirates (UAE) gained only 4.5 percent during the May-July period — the first three months after the trade agreement with the West Asian nation went into effect — despite overall outbound shipments to the country increasing by almost 16 percent to $8.09 billion, according to commerce and industry ministry data.

Comparatively, from May to July, India’s total non-petroleum exports increased by 8%, while the country’s overall exports increased by 15.1%.

The free-trade agreement (FTA), which became effective in May, has not yet resulted in significant increases in exports to the UAE, with the exception of a rise in gem and jewellery products, electronic goods like smartphones, and some petroleum products.

In contrast, India’s trade imbalance with the UAE increased by more than three times from May to July 2021 to $6.23 billion, driven primarily by an increase in oil imports as world crude oil prices continue to rise as a result of the crisis in the Ukraine and Russia.

However, government representatives and trade experts emphasised that it typically takes at least six months to measure the initial results from an FTA and that it may be too soon to draw conclusions about how much the trade agreement is helping India. Exporters are currently organising buyer-seller meetings and other outreach initiatives to encourage exporters, including those from smaller areas, to benefit from the trade agreement.

“Exports of gold jewellery are also reaping the benefits of the FTA. We have told export promotion councils to sensitise exporters even in the tier II and three cities about the India-UAE trade pact. We expect exports of products from labour-intensive sectors such as leather, footwear to benefit from the trade deal,” a senior government official told Business Standard.

Former WTO Ambassador Jayant Dasgupta stated that it would take time for exporters to decide whether they can sell new goods that will profit from trade preferences.

“For exports against a tariff line eligible for reduced FTA tariffs, only about 20-30 per cent of our exports are using the FTA route because of the time and costs involved in getting the certificate of origin issued. This is especially true of the smaller exporters,” Dasgupta said.

Since the Comprehensive Economic Partnership Agreement (CEPA) between India and the United Arab Emirates (UAE) entered into force on May 1, according to Vipul Shah, chairman of the Gem and Jewellery Export Promotion Council, exports of plain gold jewellery to the UAE have increased significantly, reversing a two-year downward trend. Provisional data shows that the gross export of plain gold jewellery increased by 21.85% YoY to $1.69 billion. Undoubtedly, the UAE imports 80% of the plain gold jewellery produced in India.

“GJEPC had also conducted a number of webinars and in-person events to make the exporters aware of the India-UAE CEPA and how one can avail benefits of the same. As a result, for the period of April to August, exports to the UAE grew 13.61 per cent to $2.34 million,” Shah said.

It will take around five to six months to really notice a change, according to Narendra Goenka, chairman of the Apparel Export Promotion Council (AEPC), although exporters have started receiving more queries from the UAE recently. “We expect growth of around 15-20 per cent in the next fiscal year,” Goenka said.

In terms of value, the trade agreement is anticipated to benefit close to 90% of India’s exports. Over 97% of the UAE’s tariff lines have total duty exemptions, which is equivalent to 99% of India’s exports in terms of value. Starting on May 1, Indian exporters will get instant zero-duty access to markets in labor-intensive industries like leather, footwear, gems and jewellery, and furniture, among others.

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