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NEW DELHI: The utilization rate of India’s free trade agreement with the UAE is expected to be 50%, a government official said, a key figure showing that Indian exporters are benefiting from tariff concessions.
NEW DELHI: The utilization rate of India’s free trade agreement with the UAE is expected to be 50%, a government official said, a key figure showing that Indian exporters are benefiting from tariff concessions.
FTA utilization in India has historically been low due to factors such as strict rules of origin (ROO) requirements, documentation costs, and lack of awareness of FTAs. It is worth noting that MSMEs account for nearly 40% of India’s exports, implying that MSME awareness of FTAS is crucial for better utilization.
FTA utilization in India has historically been low due to factors such as strict rules of origin (ROO) requirements, documentation costs, and lack of awareness of FTAs. It is worth noting that MSMEs account for nearly 40% of India’s exports, implying that MSME awareness of FTAS is crucial for better utilization.
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India has signed 19 free trade agreements, including 6 preferential trade agreements. India’s FTA utilization rate has remained below 25%, one of the lowest in Asia, according to the Asian Development Bank. In contrast, FTA utilization in developed countries averages 70-80%. “India has shared customs data with the UAE and has asked them to share the data. Confirmation of the data will reveal the exact FTA utilization and will help us zero in on underutilized FTA sectors. But according to the issued origin The number of certificates, the UAE protocol will be one of the most used protocols,” the official said.
Official free-trade agreement utilization figures are expected to be released last month after the two countries exchanged data.
“Based on the published COO, we expect a utilization rate of 50%. Our primary usage is from the gem and jewelry industry. A 50% immediate gain is significant from a value perspective. The COO figure is an early indicator. If we were The COO will be issued in January and the export will be carried out in the next month, which will be reflected later,” the official added. A COO issued to an Indian exporter certifies that the goods meet certain criteria to be considered as originating in India. Tariff concessions are required under free trade agreements and are a strong indicator of the utilization of the agreements.
The number of preferential certificates of origin issued under the agreement with the UAE increased from 415 in May 2022 to 8,440 in March 2023, according to official data. In total, more than 54,000 COOs were issued during this 11-month period. A study on India’s free trade agreements published by Divesh Pandey and Meera Unnikrishnan of IIM Ahmedabad shows that recent trade agreements, such as the one between India and the UAE, propose higher rules of origin (ROO) requirements, possibly to benefit and protect domestic producers. According to the UAE agreement, exported goods need to have a 40% added value in the country of origin.
“While rules of origin require protection of the domestic industry and try to avoid circumvention, they increase compliance costs and constraints on procurement decisions, leading to trade inefficiencies and reduced trade in specific products. In this regard, a one-size-fits-all approach needs to be avoided. Queries sent to the Ministry of Commerce and the UAE Ministry of Economy remained unanswered as of press time.
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