India is poised to significantly deepen its economic and strategic engagement with the Gulf region as it finalises a major trade pact with Oman. The two nations are set to sign a Comprehensive Economic Partnership Agreement (CEPA) on December 18 in Muscat, according to an analysis by the Global Trade Research Initiative (GTRI).
What the India-Oman CEPA Deal Entails
The agreement will be inked during Prime Minister Narendra Modi's tour, which includes Oman among three nations. This pact, following negotiations that began in November 2023, is modelled broadly on India's successful free-trade agreement with the United Arab Emirates. It encompasses a wide spectrum, including goods, services, and investment, and is expected to become operational within a few months after signing.
The core objective of the CEPA is to reduce or eliminate tariffs on a vast array of products, liberalise trade in services, and facilitate smoother investment flows. Bilateral trade between India and Oman currently stands at approximately $10.5 billion for the 2024–25 period. India's exports account for $4.1 billion, while imports from Oman are valued at $6.6 billion, predominantly comprising energy and fertiliser inputs.
Strategic Gains and Economic Impact
GTRI founder Ajay Srivastava highlighted that while Oman's market size is relatively small with a population of about five million and a GDP of roughly $115 billion, the agreement carries substantial strategic weight. "For India, the agreement strengthens its economic and strategic presence in the Gulf, even as the trade gains are more incremental than transformative," Srivastava noted.
India's key exports to Oman include:
- Naphtha ($747.6 million)
- Petrol ($561 million)
- Calcined alumina, machinery, aircraft, rice, and iron and steel articles
Although over 80% of Indian goods already enter Oman at an average tariff of around 5%, duties on some items can be as high as 100%. The tariff elimination under CEPA is anticipated to enhance the competitiveness of Indian industrial exports, though sustained growth will hinge on product quality and differentiation.
Oman, in return, gains improved access to the massive Indian market for its energy and industrial products. India's imports from Oman in FY2025 were led by:
- Crude oil (~$1.1 billion)
- Liquefied natural gas (~$1.1 billion)
- Fertilisers (~$1.1 billion)
Critical chemical inputs like methyl alcohol and anhydrous ammonia, along with petroleum coke, feed India's agriculture, chemicals, cement, and power sectors. Since many of these products already enjoy low duties under India's other trade agreements, the CEPA is expected to reinforce existing supply chains rather than drastically redirect trade flows.
Beyond Tariffs: A Comprehensive Framework
The agreement's scope extends far beyond simple tariff reductions. It covers a comprehensive negotiating agenda designed to ease non-tariff barriers and improve business predictability. Key areas include:
Intellectual property rights, government procurement, digital trade, and rules of origin. The pact also includes provisions for customs cooperation, sanitary measures, technical barriers to trade, dispute settlement, and support for small and medium-sized enterprises.
Mirroring its UAE agreement, India is expected to seek streamlined regulatory approvals for pharmaceutical products already approved by major global agencies like the US FDA, UK's MHRA, and the European Medicines Agency.
The strategic dimension of the pact is underscored by the robust existing economic links: there are over 6,000 India-Oman joint ventures, with Indian investments exceeding $7.5 billion, particularly concentrated in the Sohar and Salalah free zones. This makes the CEPA as much about cementing geopolitical influence and regional presence as it is about boosting trade volumes.
