India-Oman Trade Agreement: Strengthening India’s Gulf Strategy
India and Oman are poised to enhance their economic relationship with the signing of a Comprehensive Economic Partnership Agreement (CEPA) on December 18. This agreement, which will take place in Muscat during Prime Minister Narendra Modi’s three-nation tour, aims to strengthen trade ties and expand India’s strategic influence in the Gulf region. The CEPA will encompass goods, services, and investment, with implementation expected in the coming months following negotiations that began in November 2023.
Details of the Agreement
The CEPA is designed to reduce or eliminate tariffs on a wide array of products, liberalize trade in services, and facilitate investment between the two nations. According to the Global Trade Research Initiative (GTRI), the structure of this agreement closely resembles India’s free-trade pact with the United Arab Emirates. Bilateral trade between India and Oman reached approximately $10.5 billion in the fiscal year 2024-25, with India exporting $4.1 billion worth of goods while importing $6.6 billion, primarily in energy and fertilizer inputs.
Ajay Srivastava, founder of GTRI, emphasized that while the agreement strengthens India’s economic and strategic presence in the Gulf, the trade gains are likely to be incremental rather than transformative. He noted that Oman, despite its small market size, holds significant geopolitical and energy importance for India.
Impact on Trade Dynamics
India’s exports to Oman are led by naphtha, valued at $747.6 million, and petrol at $561 million, along with various other products such as machinery, aircraft, rice, and personal care items. Currently, over 80% of Indian goods enter Oman with an average tariff of around 5%, although some items face duties as high as 100%. The elimination of these tariffs under the CEPA is anticipated to enhance the competitiveness of Indian industrial exports. However, the report indicates that sustained growth will depend on the quality and differentiation of these products.
Conversely, Oman is expected to benefit from improved access to the Indian market for its energy and industrial inputs. In FY2025, India’s imports from Oman were dominated by crude oil, liquefied natural gas, and fertilizers, each valued at approximately $1.1 billion. Many of these products already enjoy low duties under India’s existing trade agreements, suggesting that the CEPA will reinforce current supply chains rather than significantly alter trade flows.
Broader Negotiating Agenda
Beyond tariff reductions, the CEPA encompasses a comprehensive negotiating agenda that includes intellectual property rights, government procurement, digital trade, customs cooperation, and support for small and medium-sized enterprises. These provisions aim to address non-tariff barriers and enhance predictability for businesses in both countries.
India is also expected to pursue streamlined approval processes for pharmaceutical products that have already been cleared by major international regulatory bodies, such as the US Food and Drug Administration and the European Medicines Agency. This approach mirrors similar provisions in India’s agreement with the UAE, indicating a strategic effort to facilitate trade in critical sectors.
Strategic Significance
Despite the challenges posed by Oman’s relatively small population of around five million and a GDP of approximately $115 billion, the CEPA holds substantial strategic importance. With over 6,000 joint ventures between India and Oman and Indian investments exceeding $7.5 billion, particularly in the Sohar and Salalah free zones, the agreement is as much about geopolitical positioning as it is about trade volumes. The GTRI report highlights that this partnership will likely enhance India’s regional presence while fostering economic growth for both nations.
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