Months after they forged a free trade agreement (FTA), India and the UAE have now held talks to set up a mechanism to undertake bilateral trade in national currencies. It was part of the deliberations at the 10th meeting of the UAE-India High Level Joint Task Force on Investments, which was held in Mumbai, the commerce ministry said on Tuesday. The meeting was co-chaired by commerce and industry minister Piyush Goyal and Sheikh Hamed bin Zayed Al Nahyan, member of the Executive Council of the Emirate of Abu Dhabi.
The Reserve Bank of India, in July, allowed banks to firm up appropriate mechanisms to settle international trade in the rupee. However, large banks are yet to put in place such a mechanism.
Both the sides also reviewed the UAE’s request to provide tax incentives to select sovereign investment entities under the existing UAE-India Tax Treaty to enhance the flow of investments into this country, according to the ministry’s statement. New Delhi has agreed to provide the necessary support to the UAE Fast Track Mechanism in India to ensure speedy resolution of pending issues and any difficulty faced by UAE companies and banks operating in India.
Both the sides also decided to continue talks on the adoption of the Unified Payment Interface (UPI) as a common digital payment platform in the UAE, referring to the ongoing discussions between the RBI and Central Bank of the United Arab Emirates. The two delegations also reviewed the progress of negotiations for the India-UAE Bilateral Investment Treaty.
“Both sides noted that much progress could have been achieved since the commencement of the negotiations, and therefore reiterated their commitment to accelerate the process for an early conclusion of a balanced and mutually beneficial agreement,” according to the ministry statement. So far, as many as twelve rounds of negotiations have been concluded.
The two economies also held deliberations on ways to bolster bilateral investments in sectors, including food security, manufacturing, infrastructure, energy and technology.
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Both agreed to explore establishment of “efficient and integrated Single Window Solutions and Virtual Trade Corridors” to reduce costs and time involved in trade and investment related procedures. A similar fast-track mechanism will be set up in the UAE to address issues flagged by the Indian investors in the UAE, and to assist Indian firms invest and expand their presence there.
The India-UAE Comprehensive Economic Partnership Agreement (CEPA) entered into force on May 1. Both are aiming to raise bilateral trade (goods and services) to $115 billion in five years from about $60 billion in the pre-pandemic year.
According to the pact, the UAE will allow as many as 99% of Indian goods (in value term) at zero duty in five years from about 90% in the first year. Similarly, India would allow duty-free access to 80% of goods from the UAE now and it would go up to 90% in ten years.