By Tanmay Goel, Researcher at NITISARA

The 2022 India-UAE Comprehensive Economic Partnership Agreement (CEPA) has ushered in a new era of bilateral trade, and especially so for global supply chain integration. Over 90% of Indian exports to the UAE enjoy zero-duty access, making supply chains faster, cheaper, and more dependable 1. The UAE’s strategic geographical location as a world re-export center opens up Indian exporters’ access to wider markets in the Middle East, Africa, and Europe, providing Free Zones, trade licensing and connecting logistics hubs in India and UAE.

India and the UAE have had strong economic ties for a long time, but CEPA has brought it to a higher, more strategic plane. CEPA aims to increase bilateral trade to over $100 billion in the coming couple of years with a view to removing tariff barriers, easing customs, and furthering logistics cooperation 2. These are both direct determinants of the manner in which goods are able to travel across borders and speed supply chains and make them more productive.

India-UAE Bilateral Trade Growth (2020-21 to 2024-25 H1), Source: Author’s own

UAE’s world trade infrastructure, aided by value-added ports like Jebel Ali and strong air cargo infrastructure, is ideally positioned to make it an extremely good partner for India, especially for re-exports to Europe, Africa, and the world at large. Indian exporters, particularly in the likes of gems and jewelry, textiles, foodstuffs, and electronics, are already making full use of it. But it is not plain sailing for all. Small and medium enterprises (SMEs) are still being burdened by certification standards, finance for trade, and limited exposure to cross-border logistics platforms.

How UAE’s re-export hub position benefits Indian exporters

The UAE’s re-export status puts Indian exporters at a better position to tap international supply chains. Imports to the UAE can easily be re-exported to African, European, GCC, and Central Asian nations due to its very good port connectivity and free trade zones like Jebel Ali Free Zone (JAFZA) and Khalifa Industrial Zone (KIZAD). It means Indian exporters can export to the UAE and discover not only demand in the Emirates but also supply secondary markets with minimal distribution facilities. Take Indian garments or processed food arriving in Dubai, for example. These may be re-distributed to Saudi, Egypt, or even East Africa with minimal regulatory overhead and rapid turnaround. Furthermore, UAE re-export is also helping Indian companies keep their logistics and inventory costs low. The UAE provides duty-free treatment for unsold goods, along with advanced warehouse and packaging facilities, so that Indian products can be bundled or made-to-measure before being re-exported.

CEPA’s impact on supply chains

CEPA has improved the cost-benefit effectiveness and efficiency of the trade-related supply chains between India and the UAE. Through phased reduction and elimination of tariffs on over 80% of the traded items and simplification of customs clearance procedures, CEPA enables cross-border trade at a lesser cost and in a shorter time. Such friction reduction benefits not only large firms but also enables Indian SMEs to participate more effectively in global trade. CEPA further improved cross-understanding of one another’s standards and facilitated non-tariff barriers, which are favorable to industry sectors such as pharma, textiles, and food processing. For supply chains, the implication is shorter regulatory lag at ports, greater predictability, and lower inventory holding costs. It has also encouraged more investment in warehouses, logistics parks, and transport corridors between the two countries.

CEPA has also enhanced logistics connectivity between India and the UAE, which has almost doubled bilateral merchandise trade in recent years. Major logistics corridors, such as the India-Middle East-Europe Economic Corridor (IMEC), are being developed to reduce transit times and costs, while specialized food corridors focus on supply chain efficiency and food security. CEPA mandates the use of Certificates of Origin to qualify for preferential tariffs for invoicing between traders, with requirements for value addition and specific tariff classifications. This process is streamlined for approved exporters, allowing for invoice declarations of origin.

How are the Logistics hubs in India and the UAE creating value in the sector?

Special Economic Zones (SEZs)

SEZs in India are specialized zones that are regulated by special trade and taxation laws in order to promote exports and attract investments. SEZs offer various incentives, such as 100% exemption from income tax on export income for the first five years, import of capital goods and raw materials free of charge, exemption from customs and excise duties, and facilitation in regulatory formalities. SEZs also permit 100% foreign direct investment (FDI) and provide permit advantages such as single-window clearances and flexibility for subcontracting, making them popular with export-oriented units.

India’s SEZ Export Performance and Share Growth, Source: Author’s own

Free Zones(FZs), Trade Licensing and Indian Presence

In the UAE, FZs are similar in concept and are managed by independent authorities. These zones provide 100% foreign ownership, full reinstatement of profits and capital, exemption from EXIM duties, and corporate tax holidays that can go up to 50 years. It is a known fact that the UAE Free Zones are highly alluring to Indian companies, mainly because of their easy setup process and streamlined regulatory environment along with its strategic location for the markets of the Middle East, Africa, and Europe. Indian companies have widely established their presence in the UAE Free Zones, especially in JAFZA and DAFZ. For example, over 1,500 Indian companies are hosted at JAFZA, while India also tops the investor countries for DAFZ. The upcoming Bharat Mart at JAFZA will also promote Indian exports to the area.

UAE Free Zones Comparison: Total vs Indian Companies, Source: Author’s own

Dubai Multi Commodities Centre(DMCC) and Abu Dhabi Maritime Centre(ADMC)

DMCC has become the world’s third-most connected free zone and top commodities trading hub, where its Dubai Diamond Exchange has placed Dubai as the second-largest diamond trading hub in the world after Antwerp and Mumbai. The free zone has been booming, with diamond trade increasing from $300 million in 2002 to $26 billion in 2016. The progress so far in 2024 shows a continued growth trend-the number of new member companies added in the first half alone is 1,023, making it close to 25,000 companies. Today, DMCC accounts for 15% of Dubai’s FDI and contributes 7% to the Emirate’s GDP.

ADMC has gained impressive global acclaim even though it is a new institution, with Abu Dhabi advancing 10 places to position 22 in the world in the 2024 Leading Maritime City Report. This dramatic rise from 32nd to 22nd place is the greatest jump among all the cities assessed, showcasing the emirate’s swift development in the maritime industry. The authority’s launch of the Maritime Sustainability Research Centre in 2024 also reflects Abu Dhabi’s focus on maritime innovation and environmental sustainability.

Warehouses and their costs

Warehouse costs in Sharjah and Ajman are competitive compared to Dubai, with small warehouses in Sharjah renting for AED 25,000–43,000 annually and larger facilities costing upwards of AED 140,000 annually. Ajman’s warehouse rents range from AED 95,000 for smaller spaces to AED 3 million for very large facilities. Free Zone warehouses offer advantages such as duty exemptions, indefinite storage, and streamlined customs procedures, while non-Free Zone warehouses are subject to stricter government supervision and duties upon withdrawal of goods.

Warehouse Rental Costs Comparison Across UAE Emirates, Source:Author’s own

In conclusion, Indo–UAE supply chain partnership is transforming at a rapid rate with strategic relationships like CEPA and the UAE’s historical role as a logistics and re-export hub globally. CEPA not just lowered trade barriers but also simplified customs procedures, which made cross-border supply chains faster, efficient, and economical. To Indian producers and Indian exporters of consumer goods, the UAE is a great stepping stone to the rest of the Middle Eastern, African, and European markets. But at a cost- a cost that is particularly alarming to Indian SMEs, who struggle with regulatory compliance, logistics cost, and market awareness. Conquering these hurdles requires particular government assistance, access to inexpensive trade finance, and enhanced connectivity into digital trading platforms. The ultimate success of Indo–UAE supply chains will hinge on the potential for both nations to align infrastructure, standards, and technology to create frictionless trading.

The views expressed do not represent the company’s position on the matter.

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