Published 2026-04-10 · Last updated 2026-04-24 · By Hemant Agarwal, Founder of GCI
Related analysis: India to UAE family office guide, GCC family offices allocating to India, and India-GCC DTAA and tax residency.
The India-UAE CEPA entered force in May 2022. Four years later, the numbers are in, and the gap between headline figures and actual investor utility is instructive. Goods trade grew from USD 73B in 2022 to an estimated USD 100B by end-2026. Services trade lagged. Direct investment flows in both directions grew but remain small relative to the trade number.
What CEPA actually does
CEPA is primarily a goods trade agreement with services and investment annexes. The core mechanics:
- Tariff elimination or reduction on approximately 80 percent of tariff lines for India-origin goods entering UAE and vice versa.
- Rules of origin requirements (typically 40 percent local content or a tariff shift test) to claim preferential treatment.
- Services commitments across 11 broad service sectors, with Mode 3 (commercial presence) commitments that mirror existing WTO GATS commitments.
- Investment facilitation provisions, but no new investor-state dispute settlement mechanism.
- Customs facilitation including single-window and paperless trade.
Where the value has actually landed
Goods exporters from India to UAE. Jewelry, textiles, petrochemicals, agricultural products, and engineering goods benefit from tariff elimination. For exporters running >5 percent gross margins, CEPA can add 2-4 points to margin on qualifying shipments.
UAE-origin goods to India. Chemicals, aluminium, machinery, and plastics. Indian import duties were significant; CEPA eliminated or reduced them. UAE-based manufacturers with proper origin documentation are the clear winners.
Professional services. Legal, accounting, management consulting Mode 3 flows have grown. Indian firms expanding to Dubai and Abu Dhabi use CEPA commitments to establish local presence with less friction.
Where CEPA delivered less than promised
Investment flows. There is no ISDS; CEPA investment rules largely mirror existing UAE-India Bilateral Investment Treaty (which lapsed and has not been replaced). For capital allocators, the treaty is weak on dispute resolution. Most investment structures still go through LLC wrappers in free zones or through the older RBI-route structures.
Digital economy and data. CEPA has no material provisions on data flows, data localisation, or digital trade. Given both countries' tightening data residency requirements (India DPDP, UAE PDPL), this is a material omission for any digitally-delivered service.
Rules of origin complexity. Claiming preferential treatment requires documented 40 percent local content. Many Indian exporters who source inputs globally cannot meet this, even when the final manufacturing happens in India. Utilisation rate of CEPA tariff preferences is below 60 percent per industry estimates.
How CEPA changes the investment case for a deal
For goods-trading businesses: verify CEPA utilisation before accepting the seller's projected gross margin. An Indian garment exporter who cannot actually claim CEPA preference loses the implied 6-8 point margin benefit in year 1. This has sunk more than one UAE-based family office investment thesis.
For services businesses: CEPA is largely irrelevant. Rely on existing GATS commitments and UAE free zone licensing flexibility.
For investment holding structures: CEPA adds little. Use DTAA benefits for tax treatment and structure through DIFC or ADGM for regulatory sophistication.
What we recommend
Treat CEPA as useful for goods flows, weak for capital flows. Do not let a seller pitch a thesis that depends on theoretical CEPA benefits; verify utilisation on actual shipments. For cross-border investment, structure through established RBI / FEMA / DTAA frameworks and plan for the possibility that CEPA will be renegotiated (India's standard practice is ten-year reviews).
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