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In today’s Finshots, we discuss the economic partnership between India and the UAE and how it can help improve bilateral trade.
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There is an interesting development. Jewellery exports from India to the UAE have seen significant growth. Many attribute this new development to the Comprehensive Economic Partnership Agreement (CEPA).
do not worry. The name is complicated, but the premise is fairly simple. The main goal is to improve trade between India, the UAE and the wider Gulf Cooperation Council (GCC) region.
While the protocol will only be implemented in May 2022, its benefits become apparent in just a few months.we witnessed a 10% Exports of gems and jewellery to the UAE surged in Q1 FY23 compared to the same period last year. Exports grow after CEPA implementation 17% Leaps (only in May and June compared to the same period last year).
Now you might see this and ask – “What’s so special about CEPA? Is it worth the hype?
Well, it’s complicated. But before we get there, let’s see what CEPA really means.
As we have already mentioned, CEPA is an economic partnership between the two countries. In many ways, it resembles a free trade agreement (FTA). The two countries sit down. They decided to cut trade barriers and tariffs. They work to improve trade. They set rules that enable importers and exporters from both countries to cooperate with each other. CEPA does these things too. The only difference is that FTAs have traditionally focused on trade in goods. But CEPA also extends to participation in services, foreign investment, disputes and even regulatory matters. Given our close engagement with the UAE, we signed this agreement back in February to strengthen our relationship with the country.
Unfortunately, there hasn’t been much chatter since then.
But last week, when we learned about the hidden potential here, Malabar Gold and Diamonds Said they imported 25kg of gold under CEPA. They say it’s possible because of the tax benefits.
What tax benefits are there?
When importers in India ship gold coins and bars from the UAE, they have to pay the applicable duties. But under CEPA, they get a 1% rebate – a concession. Likewise, importers in the UAE were earlier expected to pay a 5% duty on gold jewellery. Now, they don’t have to pay anything.
While this may seem trivial at first glance, there is a lot going on here. India is one of the largest gold importers.In the last (fiscal) year, we spent a lot of money $46 billion About import 842 tons of gold.The UAE is second largest Gold trading partner. So if we could import some gold at a slightly discounted price, that would reduce our import bill considerably. At the same time, if we can export gold without paying the 5% tariff, Indian jewellery products will be more attractive to UAE consumers.
This also helps us redistribute our products to neighbouring countries in the UAE. We have better access to markets in North Africa, West and Central Asia and even Europe.
Perhaps it is now clear why jewellery exports to the UAE have been climbing.At this rate, we can easily achieve our gem and jewelry export goals $45.7 billion one year.
But gold and gems aren’t the only things we’re aiming for here. The offers will also apply to textiles, leather, footwear, sporting goods, plastics, furniture, agriculture, wood products, engineered products, medical devices and automobiles.
And the service industry. Take digital trade, for example. The agreement will allow electronic transactions to proceed smoothly, barring an illegal event. All told, trade in services could cross the $15 billion mark within five years.
But what if other countries jumped on the bandwagon and took us for a ride? What if they ship cheap goods to the UAE and then find ways to push the goods to India? Wouldn’t this hurt domestic manufacturers?
um, yes. But these offers are only available for goods and services originating in the UAE, or at least where the UAE makes a meaningful contribution (40-45% value added). So there are some buffers to protect India from indiscriminate dumping.
The only question is, can we expect significant growth in other industries, as we are currently seeing with gold and gemstones? Well, we’ll have to wait and see.
Until then…
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According to a national survey, about 15% of Indian adults require treatment for one or more mental illnesses. Now, IRDAI has directed all insurance companies to provide coverage for mental health issues in accordance with their health policies.
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Also, health insurance companies do not cover mental retardation. Also, if you’re dealing with mental health issues caused by substance abuse, you’re out of luck. Insurance companies will not cover this. Finally, you also have to deal with waiting periods, just like any other illness. These can last 3-4 years.
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