India-Oman Trade and Investment Ties Deepen

Duty-Free Access for 99.38% of India’s Exports: A Turning Point in India-Oman Economic Relations

On December 18, 2025, India and Oman formally signed the Comprehensive Economic Partnership Agreement (CEPA), marking a historic shift in bilateral trade relations. Oman’s offer of zero-duty access for 98.08% of its tariff lines, covering an unprecedented 99.38% of Indian exports, represents a transformative leap in economic engagement between the two nations. This agreement is particularly noteworthy as it is Oman’s first bilateral trade pact since its Free Trade Agreement with the USA in 2006.

A Strategic Break from the Past

The India-Oman CEPA is not another routine trade agreement. It breaks from a pattern where Oman traditionally relied on regional or multilateral trade frameworks, such as the Gulf Cooperation Council (GCC). For India, this pact builds on the momentum created by the India-UAE CEPA in 2022, but goes further in its scope, especially with commitments related to enhanced mobility for Indian professionals and concessions tailored to India’s traditional medicine sector.

The mobility framework stands out: Oman has increased the quota for intra-corporate transferees from 20% to 50%, extended the stay for contractual service suppliers from 90 days to two years, with an additional two-year extension. This concession is unprecedented in GCC agreements and directly addresses India’s long-standing demand for facilitating professional services.

Another deviation lies in Oman’s commitment to traditional medicine, covering all modes of supply. While India has previously promoted its AYUSH sector globally, no country has formalized such comprehensive access. For Oman to lead in this space reflects a willingness to diversify its imports—and possibly its healthcare approach—beyond Western paradigms.

The Institutional Machinery Behind the CEPA

The CEPA was negotiated under the oversight of the Indian Ministry of Commerce and Industry, with active input from stakeholders in sectors like manufacturing, IT, and agriculture. Legally, the agreement rests on provisions under the Foreign Trade Policy of India (2023), which facilitates tariff liberalization for bilateral agreements. Oman, for its part, leveraged insights from its 2006 FTA experience to avoid disproportionate concessions on sensitive goods such as hydrocarbons.

What’s notable is India’s protectionist stance on “highly sensitive” categories. Products like agriculture goods (dairy, tea, coffee, rubber), jewellery, and base metal scrap were excluded from tariff liberalization, a move driven by domestic industry concerns. This echoes India's CECA with Australia, where similar exclusions safeguarded local producers from import surges.

FDI provisions under CEPA are equally significant. Oman has allowed 100% foreign direct investment by Indian companies in major services sectors, facilitating Indian firms' deeper integration with Oman’s economy. Over 6,000 joint ventures already operate in Oman, but CEPA provides a clearer pathway for scaling capital investments—especially in IT services and shipping infrastructure.

Dissecting the Data: A Mixed Picture

A numerical look at India-Oman trade is revealing. Bilateral trade grew from US$ 6.70 billion in FY 2017-18 to US$ 10.61 billion in FY 2024-25, fueled by non-oil exports and imports. However, the CEPA’s critical success metric will be whether it sustains this growth beyond hydrocarbons. As of FY 2025, hydrocarbons still account for more than 60% of trade by volume, underscoring dependency risks.

The promise of duty-free access on 99.38% of India’s exports to Oman appears glamorous, but not transformative for sectors excluded from the CEPA. For instance, India’s export strength in agricultural items like tea and coffee—significant in South Indian states—is shielded under exclusions. This raises regional economic questions: will CEPA disproportionately benefit manufacturing hubs over agrarian economies?

Meanwhile, cumulative FDI inflows from Oman into India, pegged at US$ 605.57 million between 2000 and 2025, lag behind even smaller players in the global FDI ecosystem. Without addressing structural bottlenecks in Oman’s inward investment framework, CEPA may simply enhance trade metrics without unlocking deeper investment flows.

Uncomfortable Questions

Despite its promise, several questions about CEPA remain unanswered. First, implementation capacity. Oman’s administrative machinery for monitoring trade agreements lacks transparency and operational efficiency, as highlighted by its slow compliance with the GCC framework’s trade facilitation mandates. Will Oman’s bureaucracy be able to deliver on promises like mobility quota expansions?

Second, state-level engagement in India may vary. Given CEPA’s focus areas, states like Maharashtra and Gujarat will likely benefit from manufacturing and service sector growth, but northeastern states exporting niche agricultural goods risk marginalization. Much depends on how India tailors state-specific trade facilitation strategies under CEPA.

Third, the timing of the pact raises eyebrows. Oman finalized this agreement despite economic turbulence within the GCC bloc post-pandemic. Was this pact a reaction to internal GCC cracks, like Saudi Arabia and UAE pursuing divergent trade policies? Or does Oman envision CEPA as a hedge against GCC overdependence?

A Comparative Anchor: Learning from South Korea

South Korea deepened its economic footprint in Oman after signing a broad trade and infrastructure pact in 2015. The South Korean model emphasized co-investment in maritime infrastructure through targeted development zones like Duqm—a strategy India could emulate. While India signed a pact for Duqm access in 2018, investment under CEPA remains concentrated in services rather than critical logistics hubs, placing India at a logistical disadvantage compared to Korea. Critically, Korea’s trade diplomacy supplemented investment with technology transfers, a gap India’s CEPA with Oman fails to address.

Practice Questions for UPSC

Prelims Practice Questions

Frequently Asked Questions