India has extended a 1% tariff concession for gold imports from the United Arab Emirates (UAE) up to 200 tonnes of inbound shipments under the comprehensive free trade pact signed on Friday.
“We are a major importer of gold and import around 800 tonnes of gold every year. We have granted the UAE a Tariff Rate Quota (TRQ) of 200 tons. The perpetual rate will be 1% lower than any rate applied from the rest of the world. So the UAE has a 1% advantage on gold bullion,” BVR Commerce Secretary Subrahmanyam said at a press briefing on Saturday. India has imported around 70 tonnes of gold from the UAE united in 2020-21 will effectively be 9% instead of 10%.
With this, Dubai could replace Zurich as the biggest yellow metal exporter to India over time. The Swiss city of Zurich currently accounts for more than half of India’s gold imports.
The Commerce Secretary told Mint that due to economies of scale, gold importers might prefer to buy more than 200 tonnes of gold from the UAE. “Dubai could rival Zurich, where half of India’s gold comes from,” he said.
Gold imports from Switzerland, at $16.3 billion, accounted for nearly half of India’s total gold inbound shipments of $34.6 billion in 2020-21.
In return, India gained duty-free access to the UAE market. “Previously there was a 5% duty on Indian jewelery exports. This has dropped to zero…the UAE will now become a very big entry point for us to enter the Middle East, North Africa and Central Asia. The jewelry industry is excited,” the Commerce Secretary said.
The pact includes a negative list, which has been left out of tariff concessions given sensitivities. Furthermore, most of the sectors where India is providing Production Linked Incentive (PLI) to boost manufacturing domestically have also been left out of the deal. Other sectors on the negative list include dairy products, fruits, vegetables, cereals, tea, coffee, sugar, footwear, dies, soaps, natural rubber, tires, medical devices, plastics, automotive manufacturing and automotive components, toys, aluminum scrap.
The pact is expected to come into force around the first week of May.
To prevent abuse of CEPA, the deal imposes a 40% value added on most goods, the Commerce Secretary said. It aims to prevent the re-export of goods imported from other countries by taking advantage of reduced tariffs without added value.
In addition, the agreement also established a permanent safeguard mechanism for certain goods. For the first time, the agreement covers government procurement, intellectual property and dispute settlement mechanisms.
The agreement covers goods, services, rules of origin, trade facilitation, SPS-TBT measures and dispute settlement.
The bilateral agreement will initially grant duty-free access to 90% of Indian products and 65% of products from the United Arab Emirates. Over a 10-year period, 97% of Indian products will have duty-free access to the UAE market and 90% of UAE products will have duty-free access to the Indian market, according to the Commerce Secretary.
Subrahmanyam pointed out that for the first time India has included a digital trade chapter in an FTA. “There will be a great harmonization of regulatory standards on how you handle digital trade between India and the UAE… We (India) are discussing digital trade or e-commerce with the European Union, the ‘Australia, the United Kingdom and Canada.’
The chapter will contain provisions regarding paperless commerce, consumer protection, unsolicited commercial electronic messages, personal data protection, cross-border flow of information and cooperation on digital products as well as electronic payments.
The pact also aims to accelerate work on a dedicated investment zone for UAE companies and joint ventures, focusing on setting up a food corridor and establishing a dedicated India Mart in the zone. outspoken from Jebel Ali.
India’s exports to the UAE increased by 77% year-on-year from April to December 2021 to reach $20 billion, accounting for 6.6% of India’s total outbound shipments.
“After the CEPA agreement, which will start at the beginning of May, we hope to reach 100 billion dollars sooner rather than later. Of the $30 billion coming from the UAE, only $15 billion in petroleum products is currently affected,” Subrahmanyam said.
It is estimated that the pact will create 10 million jobs. “CEPA will create one million jobs over the next five years in India. Moreover, job creation in the UAE will also help Indians there,” the Commerce Secretary said.
A conservative estimate is that more than 2 lakh jobs will be created in textiles and garments, 1 lakh jobs in plastic products, Subrahmanyam said.
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