India-Oman Trade Agreement: Implications of CEPA on India’s Gulf Strategy Explained by GTRI
India and Oman have taken a significant step in enhancing their economic ties by signing the Comprehensive Economic Partnership Agreement (CEPA) on December 18. This agreement marks India’s sixth free trade pact in five years and aims to solidify market access and investment opportunities rather than drastically increase trade volumes. With Oman granting zero-duty access on nearly all of its tariff lines, the pact is expected to come into effect in the coming months, further integrating India into the Gulf’s economic landscape.
Details of the CEPA Agreement
Under the CEPA, Oman has provided zero-duty access on approximately 98% of its tariff lines, which encompasses nearly 99% of India’s exports by value. In the fiscal year 2025, India’s exports to Oman reached around $4.1 billion, primarily consisting of refined petroleum products, machinery, metals, aircraft, rice, and consumer goods. While over 80% of Indian goods already enter Oman at an average tariff of about 5%, some items face duties as high as 100%. The removal of these tariffs is expected to enhance the competitiveness of Indian products, although the potential for significant trade expansion is limited due to Oman’s relatively small market size.
In return, India has committed to tariff liberalization on about 78% of its tariff lines, mainly through tariff-rate quotas designed to protect sensitive sectors. India’s imports from Oman were approximately $6.6 billion in FY25, with crude oil, liquefied natural gas (LNG), fertilizers, and essential chemical inputs dominating the trade.
Impact on Services and Professional Sectors
The CEPA also includes provisions related to services, allowing Oman to open various sectors such as information technology, professional services, education, healthcare, and research to Indian firms. Notably, the agreement facilitates the temporary entry of Indian professionals into Oman and streamlines the approval process for pharmaceuticals. These measures are expected to lower regulatory costs for Indian companies operating in Oman, thereby enhancing their operational efficiency and market presence.
The inclusion of services in the CEPA reflects a broader trend of increasing collaboration between the two nations, which could lead to more robust economic interactions in the future. This aspect of the agreement is particularly significant as it aligns with India’s strategic interests in diversifying its economic engagements beyond traditional trade.
Strategic Importance of the CEPA
According to Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), the CEPA’s broader significance lies in strengthening India’s investment and strategic footprint in Oman. Indian companies have established over 6,000 joint ventures in Oman, with cumulative investments exceeding $7.5 billion, primarily concentrated in the Sohar and Salalah free zones. This agreement is viewed as a consolidation of India’s economic position in a vital Gulf corridor, supporting long-term interests in energy security, logistics, services exports, and regional connectivity.
Oman’s strategic location at the entrance to the Gulf, coupled with its role as a logistics and energy hub, enhances the importance of the CEPA. While trade volumes may remain modest, the agreement is expected to deepen India’s engagement in the region, paving the way for future economic collaborations and partnerships.
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