India and Oman have made a significant advancement in their economic relationship by signing the Comprehensive Economic Partnership Agreement (CEPA). This agreement represents India’s sixth free trade pact in the last five years, focusing on solidifying market access and investment opportunities rather than merely increasing trade volumes. Oman has granted zero-duty access on nearly all its tariff lines, and the pact is anticipated to take effect in the coming months, further integrating India into the Gulf’s economic framework.
Details of the CEPA Agreement
Under the CEPA, Oman has extended zero-duty access to about 98% of its tariff lines, covering nearly 99% of India’s exports by value. In fiscal year 2025, India’s exports to Oman totaled around $4.1 billion, consisting primarily of refined petroleum products, machinery, metals, aircraft, rice, and consumer goods. Over 80% of Indian goods already enter Oman at an average tariff of about 5%, though some face duties as high as 100%. The elimination of these tariffs could enhance the competitiveness of Indian products, but the opportunity for significant trade growth remains limited due to Oman’s relatively modest market size.
In return, India has agreed to tariff liberalization on roughly 78% of its tariff lines, primarily through tariff-rate quotas to protect sensitive sectors. India’s imports from Oman reached approximately $6.6 billion in FY25, dominated by crude oil, liquefied natural gas (LNG), fertilizers, and essential chemical inputs.
Impact on Services and Professional Sectors
The CEPA also addresses services, allowing Oman to open various sectors—such as information technology, professional services, education, healthcare, and research—to Indian companies. Importantly, the agreement facilitates the temporary entry of Indian professionals into Oman and simplifies the approval process for pharmaceuticals. These provisions are expected to reduce regulatory costs for Indian firms operating in Oman, thereby enhancing operational efficiency and market presence.
The inclusion of services in the CEPA signifies a broader trend toward increased collaboration between the two nations and may lead to stronger economic interactions in the future. This aspect of the agreement aligns with India’s strategic interests in diversifying its economic engagements beyond traditional trade.
Strategic Importance of the CEPA
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), noted that the CEPA’s broader significance lies in strengthening India’s investment and strategic presence in Oman. Indian companies have established over 6,000 joint ventures in Oman, with total investments surpassing $7.5 billion, mainly concentrated in the Sohar and Salalah free zones. This agreement is seen as a consolidation of India’s economic stance in a crucial 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, alongside its role as a logistics and energy hub, underscores 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.
Digihunt is not a financial advisor and this is not investment advice.