Plowing ahead: India-UAE FTA can boosts Indian agribusiness and empower farmers

As per Ernst and Young’s (EY) latest report on India@100, India envisions becoming $26 trillion economy in 2047 when it completes its 100th year of independence. Toward this goal, India tirelessly working on boosting international trade, signing Free Trade Agreements with countries worldwide. Producers, processors, marketers, exporters, and supporting government departments must strengthen themselves for future-ready focusing quality products and promotion in the international market. India and the UAE share a robust trade relationship, with India being the UAE’s second-largest trading partner, accounting for 9 per cent of its total foreign trade and 14 per cent of non-oil exports. The bilateral trade between the two countries has increased from $180 million per year in the 1970s to $72.8 billion in FY21 and is projected to surpass US$ 88 billion in 2023. The UAE is also the seventh-largest investor in India, with cumulative FDI inflows of US$ 15,179 million from April 2000 - September 2022. Furthermore, the UAE is home to 3.5 million Indians, making up 30 per cent of the Emirate’s population, and their remittances are a significant source of foreign earnings. In FY2020-21, bilateral trade between the two countries stood at $43.3 billion, with India exporting goods worth $16.7 billion to the Gulf state, while imports aggregated at $ 26.7 billion. On 18 February, 2022, India and United Arab Emirates (UAE) signed Comprehensive Economic Partnership Agreement (CEPA) during a virtual summit held between Indian Prime Minister Narendra Modi and UAE President Zayed Al Nahyan. The agreement officially commenced on 1 May, 2022. The Comprehensive Economic Partnership Agreement (CEPA) between India and the UAE offers several benefits to both countries. The agreement facilitates greater market access for UAE exports by reducing or eliminating tariffs on more than 80 per cent of products entering the Indian market. Additionally, it establishes a non-discriminatory and open environment for cross-border trade, enabling businesses to operate in a more streamlined manner. Furthermore, the CEPA provides enhanced market access for UAE service providers across 11 sectors and over 100 sub-sectors. Technical barriers to trade (TBT) for UAE and Indian exporters are removed, and international standards are used as a basis for technical regulations. UAE businesses can also benefit from increased access to Indian government procurement opportunities, including a 10 per cent price preference in UAE government procurement tenders. The CEPA ensures that UAE products are not subject to anti-dumping investigations in India when they are merely transshipped. Additionally, a Joint Committee has been established to evaluate, revise and propose amendments to the agreement to improve market access. Overall, the CEPA creates a more favourable trade environment, benefiting both India and the UAE. India has a history of exporting goods, covering gems and jewellery, textiles, leather, footwear, sports goods, plastics, furniture, agricultural and wood products, engineering products, pharmaceuticals, medical devices, and Automobiles. As per the CEPA, the total value of bilateral trade in goods is expected to increase to over $100 billion and trade in services to over $15 billion within five years. Since the CEPA came into force, the trade between the countries increased to $57.8 billion. Before the agreement, the trade between the countries stood at $45.3 billion. Trade increased by 27.5 per cent. Opportunities for Indian agriculture and food produce export to UAE The UA) has a population of 9.8 million and is recognised for its high per capita wealth of around $35,000. However, the UAE faces significant challenges due to limited arable land, escalating climate concerns, and severe water scarcity, resulting in reliance on imports to satisfy nearly 90 per cent of the expanding population’s food requirements. Furthermore, the UAE’s consumption patterns have shifted from traditional staples to value-added, convenient, and healthier food. According to the United States Department of Agriculture’s Foreign Agriculture Services, the UAE imported $1.6 billion worth of dairy products in 2020, including milk and cream, cheese, and butter. The European Union accounted for the largest share of dairy imports at 35 per cent, followed by New Zealand (23 per cent), Saudi Arabia (20 per cent), Chile (3 per cent), and the United States (3 per cent). Among the top three dairy products imported by the UAE, milk and cream comprised the largest share at 43 per cent ($669 million), followed by malt extracts at 21 per cent ($284 million) and cheeses at 18 per cent ($280 million). With India’s significant strength and capacity in milk production and processing, Indian dairy farmers and professional dairies have ample opportunities to export dairy products such as milk, cream, cheese, and butter to the UAE. The category of fresh fruits, comprising apples, strawberries, grapes, and other berries, was imported by the UAE from various countries worldwide, with a total worth of approximately $943 million. The top five import market shares in this category were held by South Africa (21 per cent), India (11 per cent), the European Union (10 per cent), Iran (7 per cent), and Egypt (7 per cent). The top fresh fruit imports for the UAE in 2020 were apples ($149 million), oranges ($108 million), bananas ($101 million), and guavas, mangoes, and mangosteens ($69 million). Although India holds the second-highest share, there is significant potential to increase this percentage. Indian horticulture sector has improved to a great extent in recent years due to a number of initiatives by the Government of India and the state governments as well as improvements in technology adoption to produce export quality horticultural products. The fresh vegetable category, consisting of onions, potatoes, carrots, and others, saw the UAE import $567 million worth of produce from across the world. Iran held the largest market share at 22 per cent, followed by India (17 per cent), the European Union (16 per cent), China (15 per cent), and Pakistan (7 per cent). There is ample opportunity for smallholder farmers to increase India’s share in the fresh vegetable category by producing more and focusing on export-quality produce. These farmers require access to extension and advisory services to improve their cultivation techniques. Additionally, a strong community leader 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 crucial. Several agribusinesses and start-ups are now concentrating on these areas, which will ultimately boost India’s share in exports to the UAE. In the snack foods category, which includes products such as baked goods, puddings, potato chips, peanut butter, peanuts, and mixed nuts, the UAE imported $463 million worth of goods from across the world. The top five import market shares were held by the European Union (25 per cent), Saudi Arabia (20 per cent), the United States (12 per cent), the United Kingdom (8 per cent), and India (7 per cent). Given the UAE’s diverse population, snack foods are in high demand. India’s Small and Medium Enterprises (SMEs) sector has significant potential to contribute and expand their business by producing export-quality snack foods. Access to financial support through various bank loans and government subsidies, technological support from research institutions and experts, as well as specialist support in production, processing, marketing, and exporting, can improve India’s share in the snack food category. Overall, the CEPA between India and the UAE will enhance international trade, and help boost agricultural producers, processors, SMEs, agribusiness, and other stakeholders involved in the sector further contributing to empowering Indian farmers. Sunil Madan is associated with the College of Agriculture and Natural Resources, Michigan State University, MI, USA. Badri Narayanan Goplakrishanan is a Fellow and Former Head, Trade, Commerce, and Strategic Economic Dialogue, NITI Aayog, Government of India. Views expressed are personal. Read all the Latest News , Trending News , Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook , Twitter and Instagram .