India-UAE CEPA 2022: Unlocking New Horizons For MSME Exports

Policy Update
Bavleen

Background

In February 2022, India and the United Arab Emirates signed the Comprehensive Economic Partnership Agreement (CEPA), which took effect on May 1, 2022. This marked India’s first trade agreement with a West Asian country and demonstrated the growing partnership between the two nations.

The need for this agreement was clear. Micro, Small, and Medium Enterprises (MSMEs) contribute nearly 40% of India’s exports and are vital for job creation and regional development. However, they often face tariff and non-tariff barriers that limit their ability to compete in global markets. CEPA aimed to change this. Its main goal is to eliminate or reduce tariffs, open up opportunities for services and investment, and ease the path for Indian businesses, especially MSMEs, to trade with the UAE.

The UAE acts as a re-export hub connecting the Middle East, Africa, and Europe, making it a suitable partner for India. With CEPA, Indian MSMEs can access not just the UAE market but also a much larger global customer base.

Functioning

At the end of the day CEPA aims to create a more predictable and favorable trading environment. It removes tariffs on over 97% of the UAE’s tariff lines which covers almost 99% of India’s exports by value. This is a big benefit for sectors dominated by MSMEs like gems and jewelry, textiles, leather, engineering goods, plastics, furniture and agricultural products.

The agreement has clear rules of origin and requires exporters to get Certificates of Origin to benefit from lower tariffs. Yes it adds some paperwork but it ensures only goods made in India get these benefits.

CEPA also has joint committees and sectoral sub-groups that will review progress and address trade issues. Meanwhile the Indian government through DGFT and export promotion councils is holding awareness sessions, simplifying documentation and providing market insights to help MSMEs benefit from the agreement.

Performance

Trade Growth: Bilateral trade has crossed USD 100 billion in FY2024-25. We achieved this milestone earlier than expected. Overall trade has grown by over 16% in FY2022-23 compared to last year.
Export Boost: India’s merchandise exports to UAE has reached about USD 36.6 billion in FY2023-24. Sectors with a lot of MSMEs like gems and jewelry have almost doubled their exports.
Utilization of CEPA: Number of Certificates of Origin issued under CEPA has crossed 8,000. This means more exporters are learning to use the framework.

This gives policymakers confidence that CEPA can contribute significantly to India’s goal of USD 1 trillion merchandise exports by 2030.

Impact

Beyond numbers CEPA has impacted the MSME ecosystem positively.

Price Competitiveness: Duty free access has made Indian goods more attractive to UAE importers.
Market Diversification: By exporting to UAE MSMEs get indirect access to Africa and Europe through Dubai’s re-export network.
Job Creation: Growth in sectors like jewelry and textiles has created jobs in labor intensive areas across Gujarat, Tamil Nadu and Rajasthan.
Upgradation: MSMEs are investing in better packaging, quality standards and certifications to meet UAE market demands. This investment will help them to compete globally.

Emerging Issues

Challenges:

Low Awareness: Many small exporters don’t know how CEPA works or how to get the benefits.
Complex Rules of Origin: Compliance and documentation costs are high especially for first time exporters.
Logistics and Costs: High shipping charges and port delays can eat up the duty savings.
Access to Finance: MSMEs can’t get export credit or insurance which limits their growth.
Non-Tariff Barriers: Meeting UAE’s strict quality and safety standards is a challenge for smaller companies.

Suggested Measures:

To address these issues government and industry can:

Organize workshops in MSME clusters to raise awareness.
Simplify and digitize Certificate of Origin process.
Expand export credit guarantee programs and make financing easier.
Improve port infrastructure and customs efficiency with a single window system.
Help MSMEs get international certifications with subsidies and shared facilities.

Way Forward

India-UAE CEPA is more than just a tariff-reduction agreement. It offers a way for Indian MSMEs to enter the global market. The first two years have shown positive results. However, the next phase will need more MSME participation, simpler compliance, and better logistics and financial systems.

If we tackle these challenges, CEPA could establish a model for India’s future trade agreements. It would contribute to growth, create jobs, and bring stability to the overall economy.

References

Department of Commerce, Government of India. (2022, March 27). Comprehensive Economic Partnership Agreement (CEPA) between the Government of the Republic of India and the Government of the United Arab Emirates (UAE). Ministry of Commerce and Industry. https://www.commerce.gov.in/international-trade/trade-agreements/comprehensive-economic-partnership-agreement-between-the-government-of-the-republic-of-india-and-the-government-of-the-united-arab-emirates-uae/ Ministry of Commerce and Industry

Press Information Bureau. (2025, February 18). India-UAE Comprehensive Economic Partnership Agreement completes 3 years of signing. Ministry of Commerce & Industry. https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2104450 Press Information Bureau

India Brand Equity Foundation (IBEF). (2022, May 2). India-UAE Comprehensive Economic Partnership Agreement (CEPA) enters into force. https://ibef.org/news/india-uae-comprehensive-economic-partnership-agreement-cepa-enters-into-force IBEF

UAE-India CEPA Council. (n.d.). About Us − UAE-India CEPA Council. https://cepacouncil.com/

The Economic Times. (2023, March 25). CEPA 2022: A huge impetus to India-UAE economic ties. https://economictimes.indiatimes.com/news/economy/foreign-trade/cepa-2022-a-huge-impetus-to-india-uae-economic-ties/articleshow/89938620.cms

India Brand Equity Foundation (IBEF). (2022, May 2). India-UAE Comprehensive Economic Partnership Agreement (CEPA) enters into force. https://ibef.org/news/india-uae-comprehensive-economic-partnership-agreement-cepa-enters-into-force