Oman, Muscat – India signed a landmark economic partnership agreement with Oman on Thursday, marking a significant milestone in bilateral relations and India’s broader strategy to expand Middle East ties. The India Oman trade pact, formally known as the Comprehensive Economic Partnership Agreement (CEPA), aims to boost bilateral trade and investment while helping India diversify its export markets amid steep tariffs imposed by the United States.
Key Features of India Oman Trade Pact
The India Oman trade pact includes substantial tariff concessions from both nations designed to enhance bilateral commerce. Oman has offered zero-duty access on over 98% of its tariff lines, covering nearly all Indian exports to the Gulf nation. This generous market access extends to critical Indian export sectors including gems and jewellery, textiles, pharmaceuticals, and automobiles, according to the Indian trade ministry statement.
In reciprocal measures under the India Oman trade pact, India will cut tariffs on approximately 78% of its tariff lines, covering nearly 95% of imports from Oman by value. This balanced approach reflects both nations’ commitment to fostering mutually beneficial trade relationships while protecting sensitive domestic industries.
Strategic Importance of India Oman Trade Pact
The India Oman trade pact holds particular strategic significance for New Delhi beyond mere commercial considerations. Oman serves as a crucial gateway to the narrow Strait of Hormuz between Oman and Iran, which represents a major transit point for global oil shipments. This geographic advantage makes the India Oman trade pact an important component of India’s energy security and regional diplomatic strategy.
Prime Minister Narendra Modi emphasized the transformative potential of the India Oman trade pact during his address in Oman. “This will set a new pace of our trade, add new trust to our investments and open doors to new opportunities in many sectors,” Modi stated, highlighting the agreement’s comprehensive scope and long-term vision.
Context: US Tariffs Drive Diversification
The India Oman trade pact represents India’s second major trade agreement this year, following a similar pact with the United Kingdom. The timing reflects Indian exporters’ intensified diversification efforts to counter U.S. President Donald Trump’s punishing tariffs on Indian goods. After negotiations fell apart, Trump doubled duties on Indian goods to 50% in late August, imposing the highest tariff rates in the world on Indian exports.
The U.S. tariff hike included a 25% levy implemented in retaliation for India’s purchases of Russian oil, creating significant challenges for Indian exporters. Despite ongoing negotiations, New Delhi has been unable to close trade deals with the United States or the European Union this year, as initially intended. This impasse has made alternative trade agreements like the India Oman trade pact increasingly crucial for maintaining India’s export growth momentum.
Historic Significance for Oman
The India Oman trade pact represents Oman’s first bilateral trade agreement since its 2006 deal with the United States, underscoring the Gulf nation’s selective approach to trade partnerships. This nearly two-decade gap between bilateral agreements highlights the special significance Oman attaches to the India Oman trade pact and the broader relationship with New Delhi.
Experts view the India Oman trade pact as reflecting both nations’ evolving economic priorities and their desire to strengthen strategic ties in an increasingly complex regional environment. The agreement positions both countries to leverage their complementary economic strengths and geographic advantages.
Sectoral Benefits of India Oman Trade Pact
The India Oman trade pact is expected to deliver substantial benefits across multiple sectors. The gems and jewellery industry stands to gain significantly, with exports projected to rise from $35 million to approximately $150 million over the next three years, according to Kirit Bhansali, chairman of the Gems & Jewellery Export Promotion Council. This represents more than a fourfold increase in sectoral exports.
The India Oman trade pact also provides opportunities in Oman’s $12.5 billion services import market, where India currently holds just a 5.3% share. This substantial untapped market presents significant growth potential for Indian service providers across sectors including information technology, healthcare, education, and professional services.
Protected Sectors and Strategic Considerations
While comprehensive in scope, the India Oman trade pact includes carefully considered exclusions to protect sensitive domestic industries. Items including dairy products, tea, coffee, rubber, and tobacco have been kept out of the agreement, reflecting both nations’ concerns about protecting vulnerable agricultural sectors and maintaining domestic production capabilities.
Ajay Srivastava, founder of the Global Trade Research Initiative, observed that the India Oman trade pact is “as much about geopolitics and regional presence as it is about tariffs.” This assessment captures the multifaceted nature of the agreement, which serves economic, strategic, and diplomatic objectives simultaneously.
Current Trade Relations
India and Oman currently maintain annual bilateral trade exceeding $10 billion, providing a substantial foundation for the India Oman trade pact to build upon. The agreement is expected to significantly increase this trade volume by eliminating tariff barriers and creating new market opportunities for exporters from both nations.
Future Outlook
The India Oman trade pact positions both nations to navigate an increasingly protectionist global trade environment while strengthening their strategic partnership. As India continues seeking trade diversification opportunities and Oman pursues economic diversification beyond oil, the India Oman trade pact represents a mutually beneficial framework for sustainable long-term cooperation that could serve as a model for future agreements in the region.
