India-UAE CEPA Review: Advancing Local Currency Settlement and Non-Oil Trade

The 2nd Joint Committee Meeting (JCM) under the India-UAE Comprehensive Economic Partnership Agreement (CEPA) marks a pivotal moment in the deepening of the 'Comprehensive Strategic Partnership' between the two nations. Since the CEPA's implementation in May 2022, bilateral non-oil trade has witnessed a significant surge, underscoring the agreement's effectiveness in liberalizing market access and fostering economic synergy.

A central theme of the review was the operationalization of the Local Currency Settlement System (LCSS). By facilitating trade in the Indian Rupee (INR) and the UAE Dirham (AED), both nations aim to reduce reliance on third-party currencies. This mechanism is expected to lower transaction costs, mitigate exchange rate volatility, and streamline the settlement process for businesses. For India, this aligns with the broader strategic objective of internationalizing the Rupee and strengthening its financial footprint in the West Asian region.

The meeting also addressed the critical issue of Non-Tariff Barriers (NTBs). Both sides discussed harmonizing standards and technical regulations to ensure that sanitary and phytosanitary measures do not become hurdles for trade in agricultural and industrial goods. Furthermore, the progress of the UAE-India Investment Council and the integration of digital payment systems were highlighted as catalysts for future growth. From a policy perspective, the India-UAE CEPA serves as a blueprint for India’s future Free Trade Agreements (FTAs), reflecting a shift towards 'new-age' trade deals that encompass digital trade, investment protection, and sustainable development.