Since our school days, we are taught that neighbours are very important to live in a society. But after coming to college and preparing for Government exams like UGC NET Economics, Indian Economic Services, and UPSC Economics optional we got to know the actual importance of neighbours in a geographical way.
For a country to prosper and maintain its importance in the world, good and strong relations with neighbouring countries are a must. Talking about India, it has always maintained good relations with all the countries and now is extending its bond with UAE.
India and the UAE are in negotiations to conduct bilateral commerce in their respective currencies. Both nations’ central banks are developing standard operating procedures and protocols to promote commerce in rupees and dirhams.
Before going forward with this let us first understand the relations between India and UAE.
Do read the blog till the end, as it is a very important topic of international relations under Indian Economic Services, UGC NET Economics, and a lot more.
India and UAE Relations
- In 1972, India and the UAE established diplomatic ties.
- The larger push in bilateral relations was accomplished when India’s Prime Minister visited the UAE in August 2015, marking the start of a new strategic relationship between the two nations.
- Furthermore, during the Crown Prince of Abu Dhabi’s visit to India as the principal guest for India’s Republic Day festivities in January 2017, it was decided that bilateral relations will be elevated to a comprehensive strategic partnership.
- This provided the impetus for the start of discussions for an India-UAE comprehensive economic cooperation agreement.
What is India-UAE CEPA (Comprehensive Economic Partnership Agreement)
The India-UAE CEPA was signed on February 18, 2022, at the India-UAE Virtual Summit. The Agreement is set to go into effect on May 1, 2022.
CEPA establishes an institutional system to foster and improve commerce between the two nations.
The Agreement is a comprehensive agreement, which will cover:
- Trade-in Goods.
- Rules of Origin.
- Trade-in Services.
- Technical Barriers to Trade (TBT).
- Sanitary and Phytosanitary (SPS) measures.
- Dispute Settlement.
and many more.
- Trade in Services: India and the UAE have both granted each other market access to a wide range of service industries.
Business services, communication services, construction, and related engineering services, distribution services, educational services, environmental services, financial services, health-related and social services, tourism and travel-related services, recreational cultural and sporting services, and transportation services are some examples.
- Trade-in Goods: India will gain from the UAE’s preferential market access, particularly in labor-intensive sectors.
Textiles, leather, footwear, sports items, plastics, furniture, agricultural and wood products, engineering products, medical gadgets, and automobiles are examples.
The UAE has evolved as a significant economic center not just in the Middle East/West Asia region, but also internationally.
Significance of the CEPA deal
Every deal between countries has some or the other significance of it. Let us talk about the significance of the CEPA deal.
- The CEPA will increase bilateral commerce from $60 billion to $100 billion over the next five years.
- The strengthening of ties with the UAE will also allow Indian exporters to gain access to other West Asian nations, Africa, and portions of Europe.
- India welcomed investment from the Gulf countries into Jammu and Kashmir, which would offer new pathways for regional commerce and connectivity while also advancing the collective interests of India, Israel, the UAE, and the US.
- It is expected to generate new jobs, improve living standards, and expand social and economic opportunities in both countries.
Talking about the recent deal, its significance is to reduce the transaction cost in trades. Which will have its presence in the CEPA deal.
This was all about the India UAE relations with the current news on currency bilateral trade.
Also, a currency is considered “International” if it is generally accepted as a means of trade throughout the world.
According to SBI Research, in an early July research, an unusual phenomenon is taking place in the global currency market, with a major increase in trade in oil and other commodities in currencies such as the Renminbi, Hong Kong Dollar, and Arab Emirates Dirham.
According to the research, the Reserve Bank of India (RBI) should make a concerted effort to internationalise the Indian currency rupee in light of the continuing Russia-Ukraine conflict.
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