India-UAE FTA could boost Indian agribusiness and empower farmers

According to the latest EY report on India@100, India is projected to be a $26 trillion economy by 2047 after completing its 100th economy^day year of independence. To achieve this goal, India has worked tirelessly to promote international trade, signing free trade agreements with countries around the world. Producers, processors, marketers, exporters and government support agencies must strengthen their capabilities to future-proof quality products and promotion in international markets.

India and the UAE have a strong trade relationship, with India being the second largest trading partner of the UAE, accounting for 9% of its total foreign trade and 14% of non-oil exports. Bilateral trade between the two countries has increased from US$180 million per year in the 1970s to US$72.8 billion in FY21 and is expected to exceed US$88 billion by 2023. The UAE is also the seventh largest investor in India with cumulative FDI inflows from April 2000 to September 2022, totaling $15.179 billion. In addition, the UAE is home to 3.5 million Indians, or 30 percent of the UAE’s population, whose remittances are an important source of income abroad. In the 2020-21 fiscal year, the bilateral trade volume between the two countries was US$43.3 billion, of which India exported goods worth US$16.7 billion to the Gulf countries and imported goods worth US$26.7 billion.

India and United Arab Emirates (UAE) virtual summit between Indian Prime Minister Narendra Modi and UAE President Zayed Al Nahyan on February 18, 2022 Signed the Comprehensive Economic Partnership Agreement (CEPA). The agreement will come into force on May 1, 2022. The Comprehensive Economic Partnership Agreement (CEPA) between India and the UAE has brought many benefits to both countries. The agreement facilitates greater market access for UAE exports by reducing or eliminating tariffs on more than 80 percent of products entering the Indian market. Furthermore, it establishes a non-discriminatory and open environment for cross-border trade, enabling businesses to operate in a more streamlined manner.

In addition, CEPA provides better market access for UAE service providers in 11 industries and more than 100 sub-sectors. Technical Barriers to Trade (TBT) for UAE and Indian exporters were removed and international standards were used as the basis for technical regulations. UAE businesses can also benefit from more Indian government procurement opportunities, including a 10% price discount in UAE government procurement tenders.

CEPA ensures that UAE products will not be subject to anti-dumping investigations in India only when they are trans-shipped. In addition, a joint committee was formed to review, revise the agreement and propose amendments to improve market access. Overall, CEPA creates a more favorable trading environment, which benefits both India and the UAE.

India has a history of exporting goods spanning gems and jewellery, textiles, leather, footwear, sporting goods, plastics, furniture, agricultural and wood products, engineered products, pharmaceuticals, medical equipment and automobiles. According to CEPA, the total value of bilateral trade in goods is expected to increase to more than US$100 billion within five years, and the total value of trade in services will increase to more than US$15 billion. Since the entry into force of CEPA, the trade volume between the two countries has increased to 57.8 billion US dollars. Before the agreement, trade between the two countries stood at $45.3 billion. Trade increased by 27.5%.

Opportunities for Indian agriculture and food exports to UAE

UA) has a population of 9.8 million and is known for its high per capita wealth of approximately $35,000. However, the UAE faces major challenges due to limited arable land, escalating climate concerns and severe water scarcity, resulting in a reliance on imports to meet the food needs of nearly 90 percent of its growing population. Additionally, consumption patterns in the UAE have shifted from traditional staple foods to value-added, convenient and healthier foods.

According to the USDA Foreign Agricultural Service, the UAE imported $1.6 billion worth of dairy products in 2020, including milk and cream, cheese and butter. The EU accounts for the largest share of dairy imports at 35%, followed by New Zealand (23%), Saudi Arabia (20%), Chile (3%) and the United States (3%). Among the top three dairy products imported by the UAE, Milk and cream accounted for the largest share at 43% ($669 million), followed by malt extracts at 21% ($284 million) and cheese at 18% ($280 million). With India’s strong strength and capabilities in milk production and processing, Indian dairy farmers and specialized dairy farms have ample opportunities to export dairy products such as milk, cream, cheese and butter to the UAE.

The fresh fruit category, including apples, strawberries, grapes and other berries, is imported by the UAE from countries around the world with a total value of approximately US$943 million. The top five import market shares in this category are South Africa (21%), India (11%), the European Union (10%), Iran (7%) and Egypt (7%). In 2020, the most imported fresh fruit in the UAE is Apples ($149 million), oranges ($108 million), bananas ($101 million) and guavas, mangoes and mangosteens ($69 million). Although India has the second-highest share, there is still a lot of potential to increase it. The Indian horticulture sector has largely improved in recent years owing to a series of initiatives by the Indian government and state governments and improvements in technology adoption to produce export-quality horticultural products.

The fresh vegetable category includes onions, potatoes, carrots and more, with the UAE importing USD 567 million worth of produce from around the world. Iran holds the largest market share at 22%, followed by India (17%), the European Union (16%), China (15%) and Pakistan (7%). There is ample opportunity for small farmers to increase India’s share in the fresh vegetable category by producing more and focusing on export-quality produce. These farmers need access to extension and advisory services to improve their farming techniques. Additionally, strong community leaders can bring farmers together and prioritize high-quality production. Establishing an affordable supply chain to transport fresh produce from farms to export destinations is also important. Several agribusinesses and start-ups are now focusing on these sectors, which will eventually boost India’s share of exports to the UAE.

In the snack food category, which includes products such as baked goods, puddings, chips, peanut butter, peanuts and mixed nuts, the UAE imported goods worth US$463 million from around the world. The top five import market shares are the European Union (25%), Saudi Arabia (20%), the United States (12%), the United Kingdom (8%) and India (7%)). Given the diverse population of the UAE, the demand for snack food The portion is huge. The Small and Medium Enterprise (SME) sector in India has huge potential to contribute and expand business by producing export quality snack food. Access to financial support through various bank loans and government subsidies, technical support from research institutions and experts, and professional support in production, processing, marketing, and export can increase India’s share in the snack food category.

Overall, CEPA between India and the UAE will enhance international trade and help facilitate agricultural producers, processors, SMEs, agribusinesses and other stakeholders in the sector to further empower Indian farmers.

Sunil Madan is with the College of Agriculture and Natural Resources, Michigan State University, Michigan, USA. Badri Narayanan Goplakrishanan is a fellow at NITI Aayog, Government of India and former Head of Trade, Business and Strategic Economic Dialogue. Opinions expressed are personal.

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Updated: April 17, 2023 18:31:39 IST