Cabinet Approves India-Oman Free Trade Pact

Cabinet Clears India-Oman Free Trade Pact Amid Strategic Calculations

On 13 December 2025, the Union Cabinet approved a landmark Free Trade Agreement (FTA) with Oman, securing duty-free access for 98% of Indian goods and easing investments and services trade. This decision, timed strategically ahead of the Prime Minister's visit to Oman as part of his three-nation tour, marks a significant move in India's Gulf diplomacy. India-Oman trade, which stood at USD 8.947 billion in FY 2023-24, is expected to grow exponentially, yet such ambition invites scrutiny over execution, asymmetries, and external pressures.

An Important First for GCC Relations

At first glance, the India-Oman Comprehensive Economic Partnership Agreement (CEPA) appears to follow the regional template. After all, similar frameworks are in place with the UAE, realised in 2022, and negotiations continue with the larger Gulf Cooperation Council (GCC). However, the Oman pact diverges significantly. Unlike the UAE, where India's exports dominate areas like textiles and jewellery, Oman hosts over 6,000 joint ventures with Indian entities—spread across oil, infrastructure, and education. This dual investment and trade dynamic makes the treaty as much about development partnerships as commerce.

The timing amplifies its importance. It aligns with the 70th anniversary of India-Oman diplomatic ties, a relationship formalised in 1955 and upgraded to a Strategic Partnership in 2008. On the geopolitical front, Oman remains critical—situated at the Strait of Hormuz and hosting the Duqm Port, a cornerstone of India’s Indian Ocean strategy.

The Institutions Powering the Deal

A closer inspection reveals the machinery behind the agreement. The Commerce Ministry spearheaded negotiations, relying on precedents from the UAE pact and inputs from India’s EXIM policy roadmap. Oman’s parliamentary approval also underscores the reciprocal institutional checks at play. Yet one must ask: does India’s framework for FTA implementation track outcomes as effectively as it negotiates terms?

Consider the Oman import tariff structure, which ranges from 0-100% alongside specific duties—a complexity India must navigate. The CEPA's service provisions, while promising, depend on regulatory cohesion across technical, legal, and certification standards: areas historically underperforming in other trade agreements. For instance, India’s FTA with ASEAN, signed in 2009, suffered from asymmetric tariff liberalisation and weak utilisation of services quotas, leaving Indian exporters disadvantaged.

Moreover, Oman’s cumulative FDI inflows into India stand at just USD 605.57 million as of 2025—a commendable figure but dwarfed by its Gulf peers like the UAE, which invested USD 18 billion during the same period. Addressing such imbalances requires robust monitoring mechanisms post-ratification, a task often sidelined in India’s FTA history.

What Does the Data Really Say?

Official claims exude optimism—the government anticipates “unprecedented growth” in trade and investment. But the numbers bring a more calibrated reality into focus. Oman, while strategically positioned, is only India’s 30th largest trading partner. Its share pales in comparison to the UAE or Saudi Arabia within the same GCC framework. In terms of crude oil, although India ranks as Oman’s 4th largest market, its Gulf rivals dominate the volumes.

Additionally, Indian products expected to gain access in Oman—primarily agri-commodities, textiles, and pharmaceuticals—encounter steep competition from other exporters in these sectors. India’s pharmaceutical exports, for instance, must contend with stringent patent and safety regulations, areas where approvals are highly delayed in GCC countries. Will the CEPA adequately resolve these barriers? Neither the Cabinet's statement nor Oman’s parliamentary debates have thus far addressed the procedural bottlenecks specific to these sectors.

The Uncomfortable Questions

Buried within the optimism of high-level agreements are deeply uncomfortable implementation challenges. First, what mechanisms exist to evaluate compliance on both sides? India’s recent experiences with FTAs highlight its broader institutional weakness in trade monitoring. For instance, the utilisation rate for India’s FTAs with ASEAN and Japan remains under 25% for small exporters.

Second, should we expect Oman’s strategic importance—as a gateway to energy routes—to soften its regulatory stance towards India? Regional rivalries within the Middle East are subtle but significant. With Saudi Arabia's increasingly aggressive economic diversification efforts through its Vision 2030 plan, will Oman fully prioritise an FTA with India over GCC-level dynamics?

Finally, how prepared are Indian exporters and service providers to meet Oman’s complex tax and custom duty requirements? The CEPA appears directed at maximising gains for large corporates, but its translation to benefits for medium and small enterprises (MSMEs) remains uncertain. Without fiscal incentives or regulatory hand-holding mechanisms, the agreement risks replicating the pitfalls of earlier FTAs, with limited tangible impacts percolating down the economic ladder.

A Comparative Lens on Regional FTAs

Japan’s experience with its 2019 trade agreement with the European Union offers valuable lessons. Negotiated under intense scrutiny, the deal incorporated rigorous ex-ante impact analyses, with phased tariff eliminations and robust monitoring mechanisms. Despite initial optimism, Japanese exporters found themselves struggling to meet EU regulatory standards, which created high compliance costs.

The India-Oman CEPA lacks similarly phased approaches to tariff liberalisation or explicit capacity-building provisions for exporters. Achieving access on paper is not sufficient without addressing implementation asymmetries that could grow over time. How diplomatically or institutionally prepared is India to address such divergences?

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