Why in news?

• India has signed a trade deal with Oman to expand export opportunities in West Asia amid growing trade barriers in the US and EU, including tariffs and carbon taxes.
• The signing of the India-Oman Comprehensive Economic Partnership Agreement (CEPA) aligns with India’s strategy of accelerating free trade agreements to diversify markets as uncertainty persists over a US trade deal. 
• The deal gains added significance as negotiations with the broader Gulf Cooperation Council stalled, making Oman the second GCC member, after the UAE, to conclude a trade agreement with India.

What’s in Today’s Article?

• Strategic Context of the CEPA
• India–Oman CEPA: Key Features
• India–Oman Trade: Strategic Gateway and Market Access

Strategic Context of the CEPA

• Oman’s first FTA in nearly two decades.
• India’s second comprehensive Gulf FTA, after the UAE (2022).
  • India’s sixth free trade pact in the past five years, following deals with Mauritius, the UAE, Australia, the EFTA bloc and the UK. 
• Bilateral trade at around $10.5 billion, dominated by energy imports.
• The agreement focuses on durable economic integration, not short-term trade spikes.

India–Oman CEPA: Key Features

• Recently, India and Oman signed a Comprehensive Economic Partnership Agreement (CEPA), in Muscat.
• Under this agreement, Oman will grant duty-free access on 98.08% of tariff lines, covering 99.38% of India’s exports to Oman.
• India will liberalise tariffs on 77.79% of its tariff lines, covering 94.81% of imports from Oman.
• Oman’s strategic location positions it as a hub for: Wider GCC markets; Eastern Europe, Central Asia, and Africa.
• Oman already has duty-free access to the US under its FTA, enhancing indirect opportunities.
• Market Access and Tariff Liberalisation
  • For Indian Exports
    • Full tariff elimination for labour-intensive sectors, including:
      • Gems & jewellery, textiles, leather, footwear
      • Sports goods, plastics, furniture
      • Agriculture and food products
      • Engineering goods, pharmaceuticals, medical devices, automobiles
    • Expected to boost MSMEs, artisans, women-led enterprises, and employment.
  • Sensitive Products Excluded by India
    • Agricultural products (dairy, tea, coffee, rubber, tobacco)
    • Gold and silver bullion, jewellery
    • Certain labour-intensive items like footwear and sports goods
    • Scrap of several base metals
• Enhanced Mobility of Professionals (Mode 4)
  • This is a major highlight of the CEPA.
  • Intra-Corporate Transferees quota increased from 20% to 50%.
  • Contractual Service Suppliers’ stay extended: From 90 days → 2 years, extendable by another 2 years.
  • More liberal entry and stay for skilled professionals in:
    • Accountancy, taxation, architecture
    • Medical and allied services
• Boost to the Services Sector
  • Oman offers substantial commitments across key services, including:
    • Computer and IT services
    • Business and professional services
    • Audio-visual services
    • R&D, education, and health services
  • CEPA allows 100% FDI by Indian companies in major services sectors in Oman via commercial presence.
  • Future discussions agreed on social security coordination, once Oman’s contributory system is operational.

India–Oman Trade: Strategic Gateway and Market Access

• Oman, though smaller and less diversified than the UAE, holds strategic importance for India as a trade hub connecting West Asia and Africa.
• With annual imports of about $40 billion, Oman relies heavily on imported machinery while remaining a major energy exporter.
• India exported $4.06 billion worth of merchandise to Oman in 2024-25, which made up 0.93% of India’s total exports that year.
• It imported $6.5 billion worth of goods from Oman, comprising 0.91% of India’s total imports in 2024-25.
• Export Opportunities for India
  • Indian exports to Oman have doubled over the past five years.
  • Key exports include machinery and parts, aircraft, rice, iron and steel articles, beauty and personal care products, ceramics, and petroleum products such as naphtha and petrol.
  • Zero-duty access on 98% of Oman’s tariff lines under the CEPA is expected to boost competitiveness, especially for industrial goods, though sustained growth will depend on quality upgrades and product differentiation.
• Oman’s Trade Profile and Energy Linkages
  • Oman’s main exports include crude oil, LNG, fertilisers, and chemical inputs like methanol and anhydrous ammonia—critical for India’s energy and industrial sectors and already subject to low tariffs under existing FTAs.
  • Oman also has a US FTA (since 2009), enabling duty-free access for many products into the American market.
• Services Trade and Professional Mobility
  • India stands to gain significantly in services. Oman’s global services imports total $12.52 billion, with India holding a 5.31% share.
  • The CEPA includes strong commitments across IT, business and professional services, R&D, education, health, and audio-visual sectors.
• Petroleum and Mineral-Based Trade
  • India’s Exports to Oman
    • Petroleum products: 35.1%
    • Processed minerals: 9.2%
    • Aircraft and parts, cosmetics, basmati rice together form major shares.
• India’s Imports from Oman
  • Crude oil and petroleum gases: 38%
  • Fertilisers: 16.3%
  • Acyclic alcohols and ammonia are key imports.
  • Over two-thirds of imports concentrated in energy and fertiliser-related products.