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 India and the United Arab Emirates on Wednesday commenced negotiations for a Comprehensive Economic Partnership Agreement (CEPA).

In international trade parlance, a CEPA is an economic pact between countries which is used to reduce tariffs.

In 2017, both the countries had signed a Comprehensive Strategic Partnership.

UAE's Minister of State for Foreign Trade Thani bin Ahmed Al Zeyoudi and a high-level delegation travelled to New Delhi to hold talks aimed at improving bilateral economic relations, including expanding the existing trade and investment relationship.

The first round of CEPA negotiations will be held on September 23-24.

"Both sides will aim to conclude negotiations by December 2021 and sign a formal agreement in March 2022 after the completion of internal legal procedures and ratification," a Commerce & Industry Ministry statement said.

"A new strategic economic agreement is expected to increase bilateral trade in goods to $100 billion within five years of the signed agreement and increase trade in services to $15 billion."

The UAE is currently India's third-largest trading partner with bilateral trade in 2019-2020 valued at $59 billion.

It is also India's second-largest export destination after the US, with exports valued at approximately $29 billion in 2019-2020.

Additionally, India was the UAE's second-largest trading partner in 2019, with bilateral non-oil trade valued at $41 billion.

In addition, the UAE is the eighth-largest investor in India, having invested $11 billion between April 2000 and March 2021, while investment by Indian companies in the UAE is estimated to be over $85 billion.