India and Oman have finally signed the much awaited trade pact just before the close of the year.
The centuries-old maritime trading ties between the two countries, from Mandvi to Muscat, will today form the bedrock of vibrant commercial exchanges as the two countries signed the historic Comprehensive Economic Partnership Agreement (CEPA) during Prime Minister Narendra Modi’s visit.
The CEPA will enhance ties across a range of sectors, including energy, agriculture, logistics, infrastructure, manufacturing, health, financial services, green development, education, and connectivity.
Oman cannot be a replacement for the US, but at a time when the Trump administration’s decision on tariffs is causing pain to Indian exporters, Muscat came forward to fulfil New Delhi’s needs as a civilizational partner.
India-Oman Ties
The CEPA comes in the backdrop of India’s frictionless ties with Oman for decades. History is testimony to the fact that when India’s ties with some of the other Gulf states have had irritants, Delhi could always count on Muscat for support. In December 2023, Sultan Haitham bin Tarik, Sultan of Oman, visited India. The timing of the visit was key—it was in the aftermath of October 7 when Israel was hit by terror attacks, which went on to lead to a full-blown war in the region.
New Delhi did face some headwinds due to its close ties with Israel.
However, the Sultan’s visit reflected the close partnership that India and Oman shared and that it was independent and based on trust and confidence.
While others in the Gulf looked towards the West, Oman decided to ‘Look East’ across the Indian Ocean Region to India.
Few are aware that the Father of modern Oman and legendary Sultan Sultan Qaboos bin Said Al Said had deep admiration for India and its culture. At the palace, he was surrounded by Indians, many of whom were his personal staff.
Having studied in India, Qaboos felt that Oman’s future lies in deepening the partnership with India. The current Sultan Haitham bin Tariq, in partnership with PM Modi, is building on that foundation to prepare for the New Age economy.
Often understated, Oman is one of those countries that are often used by big powers for communicating with Iran. Muscat, like India, has always believed in strategic autonomy and a balanced foreign policy.
Oman, A Key Gateway For India
Oman is a key gateway for Indian goods and services to the wider West Asia and Africa. Nearly seven lakh Indian nationals live in Oman, including Indian merchant families with a presence for over 200–300 years. They have contributed significantly to Oman’s economy and society.
Indian enterprises have built a strong presence in Oman, with over 6,000 Indian establishments operating across sectors. The annual remittances stand at around US$ 2 billion, reflecting the depth of economic engagement.
The CEPA is indeed a landmark and sets the template for other Gulf economies like Qatar.
What Does CEPA Provide
The India-Oman CEPA provides New Delhi with unprecedented market access, offering zero-duty on 98.08% of Oman’s tariff lines, which cover 99.38% of India’s exports by value. This will significantly benefit labour-intensive sectors, generating employment and strengthening micro, small and medium enterprises (MSMEs), artisans, and women-led enterprises.
Key export sectors, including textiles, leather, footwear, gems and jewellery, engineering goods, plastics, furniture, agricultural products, pharmaceuticals, medical devices, and automobiles, will gain from full tariff elimination, reinforcing India’s manufacturing and export competitiveness.
Importantly, under the trade framework, protection has been given to India’s sensitive sectors to safeguard the interests of our farmers and small businesses.
The agreement provides a comprehensive and forward-looking framework for services trade, covering IT, business and professional services, research & development, education, health, and audio-visual services.
Indians and Indian businesses enjoy tremendous goodwill in Oman.
Bilateral trade between the two economies reached US$ 10.61 billion in FY 2024–25, and CEPA will contribute to boosting this figure. India is Oman’s fourth-largest source of non-oil imports and third-largest market for non-oil exports (FY 2024–25).
There are over 6,000 India-Oman joint ventures present in Oman, adding US$ 7.5 billion to Oman’s economy in the form of the total capital investment over a long period, encompassing formal outward direct investment of US$ 675 million, the total value of all capital committed to joint ventures and the third country investments. Oman’s foreign direct investment equity inflow into India totalled US$ 605.57 million (2000–2025).
Oman-India Joint Investment Fund (OIJIF), a 50-50 Joint Venture between the State Bank of India and the Oman Investment Authority of Oman, was set up as a special purpose vehicle (SPV) to invest in India. It has fully invested US$ 320 million, and currently third tranche of US$300 million is under implementation. Oman India Fertiliser Company(OMIFCO) established in Sur, is a US$ 969M Joint Venture between Oman Oil Company, IFFCO, and KRIBHCO.
With enhanced mobility provisions in CEPA, there will be more avenues for Indian skilled professionals in other service sectors such as accountancy, taxation, medical, and allied services.
100% FDI For Indian Businesses
A 100% FDI for Indian companies in major services sectors will unlock high-value opportunities for Indian talent.
The CEPA is expected to fast-track marketing authorisations for pharmaceutical products approved by the USFDA, EMA, UKMHRA, etc., thus reducing time and cost for Indian pharma exporters.
India is offering tariff liberalisation on 77.79% of its total tariff lines (12556), which covers 94.81% of India’s imports from Oman by value. For the products of export interest to Oman and which are sensitive to India, the offer is mostly a tariff-rate quota (TRQ) based tariff liberalisation.
The agreement features a comprehensive and forward-looking services package, with Oman extending substantial commitments across a broad spectrum of sectors, including computer-related services, business and professional services, audio-visual services, R&D, education and health services. These commitments are expected to unlock significant new opportunities for Indian service providers, promote high-value job creation, and support expanding commercial engagement between the two countries.
Interestingly, this is the first bilateral trade agreement that Oman has signed with any country after the pact with the US in 2006. Naturally, this signifies India’s role and standing in Oman’s foreign policy.
The CEPA has the potential to take India-Oman centuries old partnership to the next level in the spirit of trust and bonding while setting the template for other emerging economies in the Indian Ocean Region.
(The writer is a commentator on geopolitics. Views are personal.)
* press release picked from the secretariat https://thesecretariat.in/article/india-oman-cepa-its-not-just-about-trade-but-its-upgradation-of-civilizational-ties
