Introduction
India and Oman are on the verge of finalizing a Comprehensive Economic Partnership Agreement (CEPA), marking a significant milestone in their bilateral relations. This free trade agreement aims to eliminate tariffs on a broad spectrum of goods, thereby enhancing trade and investment flows between the two nations. The CEPA is anticipated to bolster India’s exports to Oman, particularly in sectors such as petroleum products, textiles, electronics, pharmaceuticals, machinery, and iron and steel. This development is expected to not only strengthen economic ties but also pave the way for deeper strategic cooperation between the two countries.
The Progress of Negotiations
Negotiations for the CEPA have been progressing at a swift pace, with both nations displaying a strong commitment to concluding the deal promptly. The fifth round of talks commenced in January 2025 in New Delhi, covering various aspects of trade, including goods, services, and investments. Both sides have expressed optimism about wrapping up the agreement soon. The discussions have also focused on reducing non-tariff barriers, harmonizing standards, and ensuring smoother trade flows. The rapid progress reflects the mutual benefits both nations expect from this agreement and their intent to capitalize on each other’s economic strengths.
Economic Significance of the Deal
Oman holds the position of India’s third-largest export destination among the Gulf Cooperation Council (GCC) countries. In the fiscal year 2022-23, bilateral trade between the two nations stood at $12.39 billion, with India’s exports to Oman amounting to $4.48 billion. Key export items included petroleum products, iron and steel, electronics, and machinery. On the other hand, India’s imports from Oman, primarily petroleum products and urea, were valued at approximately $8 billion during the same period.
The implementation of the CEPA is expected to further enhance these figures by eliminating existing tariffs and reducing trade barriers. Analysts believe that the free trade deal could boost bilateral trade beyond $15 billion in the next few years. The agreement is also seen as a strategic move by India to deepen its economic ties with the Middle East, a region that holds immense potential for Indian businesses across multiple sectors.
Potential Benefits for India
The CEPA is poised to provide substantial benefits to Indian exporters. Currently, over 80% of India’s goods enter Oman with an average import duty of 5%. The elimination of these duties under the CEPA would make Indian products more competitive in the Omani market. Sectors expected to gain significantly include:
- Petroleum Products: Motor gasoline exports, currently valued at $1.7 billion, could see a significant boost.
- Iron and Steel: Exports worth $235 million stand to benefit from reduced tariffs.
- Electronics: With current exports at $135 million, the sector is poised for growth.
- Machinery: Exports valued at $125 million could increase substantially.
- Textiles and Garments: Currently exporting $110 million worth of goods, this sector is set to expand rapidly.
These projections highlight the CEPA’s potential to diversify and strengthen India’s export portfolio to Oman. Small and medium enterprises (SMEs) in India, particularly those in textiles, engineering, and agriculture, are also expected to benefit significantly from this trade agreement.
Opportunities for Oman
For Oman, the CEPA represents an opportunity to diversify its economy beyond oil. The agreement is expected to attract Indian investments in sectors like logistics, information technology, and renewable energy. Omani businesses could gain better access to the vast Indian market, which offers a growing consumer base and a demand for Omani products such as fertilizers, chemicals, and dates. Moreover, Omani ports could see increased activity, enhancing their role as trade hubs in the region.
Strategic Importance for India
Beyond economic gains, the CEPA holds strategic significance for India. Oman, with its strategic location in the Arabian Peninsula, serves as a gateway to other GCC countries and East Africa. A robust trade agreement with Oman could pave the way for deeper economic integration with the broader Middle East region.
Additionally, as Oman becomes the second GCC member after the UAE to sign an FTA with India, it sets a precedent for future agreements with other GCC nations. Strengthening ties with Oman also aligns with India’s broader “Look West” policy, which focuses on enhancing trade, energy security, and strategic partnerships with Middle Eastern countries.
Challenges and Considerations
While the prospects of the CEPA are promising, certain challenges need attention:
- Trade Balance: India’s trade deficit with Oman, primarily due to high imports of petroleum products, remains a concern. Addressing this imbalance will require a focus on boosting Indian exports across various sectors.
- Regulatory Harmonization: Aligning standards and regulations to facilitate smoother trade flows requires concerted efforts from both sides. Differences in regulatory frameworks, customs procedures, and product standards can pose challenges.
- Stakeholder Engagement: Continuous dialogue with industry stakeholders is essential to address concerns and maximize the benefits of the agreement. Indian businesses have raised concerns about competition from Omani firms, which need to be addressed through adequate safeguards in the agreement.
- Geopolitical Risks: The Middle East remains a region of geopolitical tensions, and any escalation could impact trade flows and investments. Ensuring energy security and stable supply chains will be crucial for India.
The Road Ahead
As negotiations draw to a close, both countries are keen to formalize the CEPA in the coming months. Experts suggest that once signed, the agreement could come into effect within a year, following the completion of legal and procedural formalities. Business communities in both countries have expressed optimism about the potential of the CEPA to unlock new trade opportunities and enhance investments.
The Indian government, on its part, is likely to launch outreach programs to inform exporters about the benefits of the CEPA and help them tap into the Omani market. Trade delegations and business summits are expected to follow, focusing on key sectors like energy, logistics, IT, and agriculture.
Conclusion
The impending India-Oman CEPA represents a landmark development in the economic relations between the two countries. By eliminating tariffs and fostering a conducive environment for trade and investment, the agreement is set to unlock new opportunities for businesses and contribute to the economic growth of both nations. As negotiations enter the final stages, stakeholders from various sectors eagerly await the formalization of this historic pact, anticipating a new era of enhanced bilateral cooperation.
The successful conclusion of this agreement could also send a strong signal to other GCC countries about the potential benefits of entering into similar trade deals with India, thereby expanding India’s trade footprint in the Middle East. For now, all eyes remain on New Delhi and Muscat as they work towards sealing this historic trade pact.
