India-UAE trade: Logistics holds the key to successful trade ties

One of the UAE’s most remarkable achievements in the last few decades has been establishing the country as a major logistics gateway for the flow of international trade.

With over five decades of diplomatic relations, shared synergies, and more than 3.3 million Indians living in the UAE, the Emirates has evolved into one of India’s most significant trade partners in the Gulf region.

The Comprehensive Economic Partnership Agreement (CEPA), signed in February 2022 between the UAE and India, is a fitting example. The bilateral agreement strengthened the relationship between the two countries in terms of creating new trade opportunities for small and medium-sized enterprises (SMEs).

Read: UAE and India sign Comprehensive Economic Partnership Agreement

A platform for SMEs to flourish

SMEs continue to be the backbone of the UAE and India’s economies. Yet, in order to remain resilient and even flourish in challenging times, SMEs must first be able to operate and move goods without disruption. This is where the CEPA comes into play.

By reducing 80 per cent of tariffs on goods moving between the UAE and India, and guaranteeing that all tariffs would be eliminated within ten years, the CEPA gives SMEs in both countries easy access to businesses and customers within 11 service sectors and over 100 sub-sectors. These include key sectors such as healthcare, construction, education, transport, metals, processed food and more.

The key to this opportunity is a seamless cross-border trade network, a dependable logistics partner, and an ecosystem that will empower SMEs to succeed.

Logistics infrastructure is essential for bilateral trade prosperity

The agreement is expected to increase the total value of bilateral trade in goods by 120 per cent to more than $100bn within five years. These figures highlight the need for a strong logistics industry to push bilateral trade to the next level. Interestingly, the UAE is India’s third-largest trading partner and the second-largest export destination, accounting for 40 per cent of its total trade with the Arab world.

Trade in sectors such as gems and jewellery has seen exponential growth since the CEPA signing. It is anticipated that trade across the pharmaceuticals, medical devices, and automotive sectors will also substantially increase, leading to more investment in smart and specialised supply chain networks to meet the industries’ needs.

Pharmaceuticals, for instance, require specialised services such as an end-to-end temperature-controlled supply chain to ensure the shipment’s integrity. Valuable goods like gems and jewellery will benefit from digitised processes for customs documentation to streamline lengthy or complex paperwork procedures. In this scenario, businesses that work with the right logistics provider have a competitive edge.

Logistics investment is fundamental to the UAE and India’s economies, and is crucial for the import and exports’ success. The Indian logistics market is estimated to reach $380bn by 2025, while the freight and logistics market in the UAE is predicted to generate more than $31bn by 2026. The UAE and India’s logistics infrastructure, paired with free-trade policies, bi-lateral agreements, and growing investments and trade links, will have an enormous impact on trade between the two countries and the wider Gulf region. This, in turn, will result in a self-reliant and sustainable economy.

Also read: India-UAE Partnership Summit held, underscores economic partnerships for joint growth

Taarek Hinedi is the VP of FedEx Express Middle East and Africa Operations.