India and the United Arab Emirates (UAE) signed a Free Trade Agreement (FTA) on Friday evening. This is the first bilateral trade pact between the two nations.

The FTA is set to reduce tariffs for 80% of goods and give zero duty access to 90% of India’s exports to the UAE. The pact will have a beneficial effect on India’s gems and jewellery sector as the UAE accounts for 80% of India’s plain gold jewellery exports and 20% of studded jewellery exports.

According to GJEPC, exports to UAE have witnessed the highest fall of 41.50% between April 2021 and January 2022 on a year-on-year basis. India’s exports of studded gold jewellery declined from $1.04 billion in FY2017 to US$400 million in 2020-2021, which are expected to go back to the average level of $ 800 million, now that the duty will be withdrawn.

Talking about the development, Commerce Secretary B V R Subrahmanyam said: “We’ve given tariff concessions to UAE on gold, and they have eliminated tariffs on jewellery.” India imported about 70 tonnes of gold from the UAE in FY21.

The FTA, which is expected to come into effect in about 60 days, is expected to boost annual bilateral trade to $100 billion within five years of its adoption, up from about $60 billion currently. The Comprehensive Economic Partnership Agreement was signed by Commerce and Industry Minister Piyush Goyal and the UAE’s Minister of Economy Abdulla bin Touq Al Marri after 88 days of negotiations.

“This comprehensive economic partnership agreement covers a wide array of gains for both economies, provides opportunities for business in both economies,” said Goyal. The Minister added the agreement would boost the country’s exports in a number of labour-oriented sectors, including gems and jewellery, textiles, leather, footwear, sports goods, engineering goods, and pharmaceuticals. Annual exports worth about $26 billion from India that currently attract a 5% import duty in the UAE are set to benefit.

The agreement covers areas including goods, services, rules of origin, customs procedures, government procurement, intellectual property rights, and e-commerce. “I’m confident that the UAE India Comprehensive Economic Partnership Agreement will be regarded as a towering achievement, a new era not only for our two nations but for global trade,” said Al Marri, adding both countries had removed tariffs on over 80% of products.

Further tariff concessions are expected on both sides over five years that will lead to lower tariffs for 98% of exports and 90% of imports from the UAE.

Goyal noted that the deepening of the relationship with the UAE would also help Indian exporters gain access to other West Asian countries, Africa and some parts of Europe.