Oman Trade Deal Anchors India’s Expanding Gulf Strategy

India and Oman are set to sign a free-trade agreement on Thursday, marking a significant step in deepening economic and strategic ties between New Delhi and the Gulf. 

The pact, which is officially titled the India–Oman Comprehensive Economic Partnership Agreement, will be signed in Muscat during Prime Minister Narendra Modi’s three-nation tour of the region, following negotiations that began in November 2023.

The agreement aims to substantially reduce or eliminate tariffs on a wide range of goods, liberalise services trade and facilitate investment flows. Bilateral trade between the two countries stood at about $10.5 billion in 2024–25.

Oman, a strategically-located energy producer and logistics hub, is seeking greater access to India’s vast consumer market, while India is looking to secure improved terms for its exports and deepen cooperation in energy, services and strategic sectors.

The structure of the CEPA broadly mirrors the commitments India offered the United Arab Emirates under their bilateral trade pact, reflecting New Delhi’s evolving template for Gulf trade agreements.

The CEPA covers a wide negotiating agenda, including goods, services, intellectual property, government procurement, digital trade, rules of origin, customs cooperation, sanitary and phytosanitary measures, technical barriers to trade, dispute settlement, and support for small and medium-sized enterprises. Together, these chapters aim to reduce non-tariff frictions and improve predictability for businesses on both sides.

Export Gains
For India, the main gains lie in merchandise exports. India’s exports to Oman stood at $4.1 billion in FY2025, led by naphtha ($747.6 million) and petrol ($561 million), alongside calcined alumina ($313 million), machinery ($231 million), aircraft ($165 million), rice ($182 million), iron and steel articles ($120 million), beauty and personal care products ($128.6 million) and ceramic products ($79.9 million).

Currently, over 80% of Indian goods enter Oman at an average tariff of around 5%, but duties range widely from zero to as high as 100% on select products such as certain meats, alcohol and tobacco. Tariff elimination under the CEPA is expected to improve competitiveness for Indian industrial exports, though sustained growth will depend on quality upgrades and product differentiation in Oman’s relatively small market.

Oman, in turn, stands to gain from improved access to the Indian market for energy and industrial inputs. India imported $6.6 billion worth of goods from Oman in 2024-25, dominated by crude oil ($1.1 billion), liquefied natural gas ($1.1 billion) and fertilisers ($1.1 billion). Chemical inputs such as methyl alcohol ($435 million) and anhydrous ammonia ($382.4 million), along with petroleum coke ($315 million), are critical for India’s agriculture, chemicals, cement and power sectors. Most of these items already enjoy low tariffs under India’s other FTAs, suggesting the CEPA will reinforce existing supply chains rather than radically reshape trade flows.

Regulatory Streamlining
India is also expected to seek streamlined approval pathways for pharmaceutical products already cleared by regulators such as the US FDA, the UK’s MHRA and the European Medicines Agency, similar to provisions included in its UAE agreement.

Despite its promise, the pact has clear limitations. Oman’s population of about five million and GDP of roughly $115 billion constrain the scale of long-term trade expansion, especially when compared with India’s $4 trillion economy and 1.4 billion consumers.

Still, the agreement carries strategic weight. With more than 6,000 India–Oman joint ventures and Indian investments exceeding $7.5 billion, particularly in Oman’s Sohar and Salalah free zones, the CEPA is as much about geopolitics and regional presence as it is about tariffs. For India, it represents another step in cementing its economic footprint in the Middle East.