India–Oman CEPA

19.12.2025

India–Oman CEPA

Context

In 2025, India and Oman officially signed a Comprehensive Economic Partnership Agreement (CEPA). This landmark deal represents India’s second major trade pact in the West Asian region, following the 2022 agreement with the UAE, and signifies a deepening of bilateral economic and strategic ties.

About the News

Background: The India–Oman CEPA is a holistic agreement designed to eliminate trade barriers and enhance cooperation across goods, services, and investments. It marks Oman’s first bilateral trade agreement since its 2006 FTA with the United States.

Key Features of the Agreement:

• Tariff Elimination: Oman has removed customs duties on 98.08% of its tariff lines, covering nearly 99.38% of Indian exports.
• Service Sector Liberalization: Access granted to 127 service sub-sectors, including high-value areas like IT, R&D, healthcare, and education.
• Professional Mobility (Mode 4): Significant increase in the quota for intra-corporate transferees (from 20% to 50%) and extended stays for contractual suppliers.
• Investment & Ownership: Indian companies are permitted 100% foreign direct investment (FDI) in major service sectors within Oman.
• Pharma & Wellness: Accelerated approval processes for Indian pharmaceuticals and a global-first commitment to traditional AYUSH medicines across all modes of trade.

Strategic Significance: India’s West Asia Strategy

• Market Diversification: Reduces dependence on Western markets (US/EU) where Indian exports increasingly face carbon-linked barriers like the Carbon Border Adjustment Mechanism (CBAM).
• Oman as a Gateway: Strategic proximity to the Strait of Hormuz and ports like Duqm and Sohar allow India to use Oman as a re-export hub for East Africa and the wider Gulf.
• Energy Security: Ensures a stable supply of LNG, crude oil, and fertilizers, which are critical for India’s energy and agricultural stability.
• GCC Leverage: While broader India–GCC (Gulf Cooperation Council) talks remain stalled, bilateral pacts with the UAE and Oman provide India a firm competitive foothold in the region.

Challenges

• Market Scale: Oman’s domestic market is relatively small (annual imports ~USD 40 billion), which may cap the ceiling for direct export growth.
• Quality & Standards: Indian exporters face pressure to upgrade packaging and branding to meet the premium preferences of Gulf consumers.
• Geopolitical Risks: Ongoing volatility in the Red Sea and broader West Asia can lead to sudden spikes in freight and insurance costs.
• Implementation Gaps: Non-tariff barriers (NTBs) and potential delays in professional visa processing could dilute the intended benefits of Mode 4 mobility.

Way Forward

• Logistics Hub Development: Capitalize on the Duqm port for industrial cooperation, positioning it as a redistribution center for Indian goods.
• Value-Addition: Shift the export profile from raw materials to finished, high-value goods like processed jewelry and specialized engineering products.
• Mutual Recognition: Fast-track agreements to recognize professional qualifications (doctors, architects, engineers) to maximize service sector gains.
• Policy Integration: Align the benefits of the CEPA with domestic initiatives like the Production Linked Incentive (PLI) scheme to boost manufacturing exports.

Conclusion

The India–Oman CEPA is a vital pillar of India's "Look West" economic policy. By balancing tariff-free access with deep commitments to service mobility, the pact offers a resilient alternative to traditional Western trade routes. If implemented effectively, it will transform Oman into a strategic economic bridge connecting Indian industry to the markets of the Middle East and Africa.