India–Oman CEPA
Kartavya Desk Staff
Source: ET
Subject: International Relations
Context: India and Oman signed a Comprehensive Economic Partnership Agreement (CEPA) marking India’s second major trade pact in West Asia after the UAE.
About India–Oman CEPA:
What it is?
• A Comprehensive Economic Partnership Agreement (CEPA) aimed at deepening trade, services, investment and mobility between India and Oman.
• It is Oman’s first bilateral trade agreement since the US FTA (2006).
Key features of India–Oman CEPA:
• Zero-duty market access: Oman has eliminated customs duties on 98.08% of its tariff lines, covering 99.38% of India’s exports, making Indian goods significantly more price-competitive.
• Boost to labour-intensive sectors: Sectors like textiles, leather, gems & jewellery, engineering goods, pharmaceuticals and automobiles gain from full tariff elimination, supporting jobs, MSMEs and export-led growth.
• Wide services liberalisation: Oman has opened 127 services sub-sectors, including IT, professional services, R&D, education and healthcare, creating high-value opportunities for Indian service providers.
• Enhanced mobility for professionals (Mode 4): The quota for intra-corporate transferees rises from 20% to 50%, while contractual service suppliers can stay up to two years, extendable further, improving workforce mobility.
• 100% FDI in services: Indian companies are allowed full foreign ownership in major services sectors in Oman, enabling long-term commercial presence and regional expansion.
• AYUSH and traditional medicine access: For the first time globally, a country has committed to traditional medicine across all modes, opening the Gulf market for India’s AYUSH and wellness sectors.
• Faster pharmaceutical approvals: Acceptance of approvals by USFDA, EMA and UKMHRA reduces regulatory delays and costs, speeding up Indian pharma exports to Oman.
Oman deal and India’s West Asia trade strategy:
• Market diversification beyond the West: The Oman CEPA helps India reduce overdependence on the US and EU, where exports face higher tariffs and carbon-linked barriers like CBAM.
E.g. EU’s carbon tax has raised compliance costs for Indian steel and cement exporters, making West Asia a safer alternative market.
• Oman as a gateway economy: Oman’s location near the Strait of Hormuz allows Indian goods to access West Asia, East Africa and trans-shipment hubs efficiently.
E.g. Ports like Duqm and Sohar can serve as re-export bases for Indian engineering and consumer goods.
• Strategic foothold within GCC: With FTAs with UAE (2022) and Oman (2025), India gains leverage despite stalled India–GCC negotiations.
E.g. Two bilateral pacts help India avoid tariff disadvantages in Gulf markets dominated by EU and East Asian exporters.
• Services-led trade expansion: The deal strengthens India’s core strength in IT, healthcare, education and professional services, sectors less affected by tariff barriers.
E.g. Oman’s services imports are USD 12.5 billion, while India’s share is only 5.3%, indicating untapped potential.
• Energy-security complementarity: India secures stable access to crude oil, LNG, fertilisers and petrochemical inputs, vital for domestic energy and agriculture.
E.g. Oman remains a reliable LNG supplier amid global energy volatility after the Ukraine conflict.
Challenges associated with the Oman CEPA:
• Limited market size: Oman’s domestic market is small, which may restrict large-scale export growth beyond niche and re-export segments.
E.g. Oman’s annual imports are around USD 40 billion, far smaller than UAE or Saudi Arabia.
• Competitiveness and quality gaps: Indian exporters must upgrade quality, packaging and branding to sustain long-term market presence.
E.g. Gulf consumers increasingly prefer premium and certified products.
• Implementation and NTB risks: Actual gains depend on smooth implementation of services mobility and non-tariff barrier
E.g. Delays in professional visa processing can dilute Mode 4 benefits.
• Regional geopolitical volatility: West Asia remains exposed to conflicts, energy shocks and shipping disruptions.
E.g. Red Sea tensions have recently raised freight and insurance costs.
• Fragmentation of GCC trade policy: Multiple bilateral FTAs may complicate the path to a comprehensive India–GCC trade agreement.
E.g. Different rules of origin can increase compliance burden for exporters.
Way ahead:
• Develop Oman as a re-export hub: Position Oman as a logistics and redistribution centre for Indian goods entering Africa and the Middle East.
E.g. Leveraging Duqm port under India–Oman industrial cooperation.
• Move up the value chain: Shift focus from raw exports to value-added manufacturing and brand-led exports.
E.g. Engineering goods and finished jewellery instead of raw materials.
• Deepen services and skills integration: Fast-track mutual recognition agreements and professional mobility frameworks.
E.g. Easier entry for Indian doctors, architects and IT professionals.
• Align with domestic growth schemes: Integrate CEPA benefits with PLI schemes, MSME clusters and skilling initiatives.
E.g. PLI-supported auto and electronics exports to Gulf markets.
• Use bilateral success to revive GCC talks: Leverage Oman and UAE pacts to rebuild momentum for an India–GCC FTA.
E.g. Demonstrating mutual gains to other GCC members.
Conclusion:
The India–Oman CEPA strengthens India’s West Asia trade pivot at a time of rising protectionism in the West. By combining tariff-free goods access, deep services commitments and professional mobility, the deal enhances India’s export resilience. If effectively implemented, it can transform Oman into a strategic economic bridge linking India to the wider Gulf and Africa.
Q. “India’s outreach to West Asia increasingly blends economic pragmatism with strategic balancing.” Assess how such engagements strengthen India’s role in the region. (10 M)