Labour-intensive sectors to gain from zero-duty access on 98% of Oman’s tariff lines
India on Thursday signed a free trade agreement (FTA) with Oman, marking its second trade pact with a Gulf Cooperation Council (GCC) country after the UAE. The move aims to expand market access for Indian exporters in West Asia at a time when high tariffs in the US market are impacting trade and investment flows.
Prime Minister Narendra Modi, who met Oman’s Sultan Haitham bin Tarik in Muscat, addressed the India-Oman Business Forum and described the agreement as a landmark step. “Today we are taking a historic decision whose impact will resonate for decades. The Comprehensive Economic Partnership Agreement (CEPA) will inject new confidence and energy into our partnership in the 21st century. It serves as a blueprint for our shared future, boosting trade, strengthening investment, and opening new opportunities across all sectors,” he said.
Modi added that CEPA would generate fresh avenues for growth, innovation, and employment, particularly for the youth. Emphasising the role of businesses, he said their participation would be vital in translating the agreement from policy into action, noting that meaningful partnerships are built when enterprise and policy work together to create lasting change.
Under this agreement, Oman has granted zero-duty access on 98% of its tariff lines, which, according to official estimates, could boost exports by $2 billion in the near future. This is expected to benefit sectors such as gems and jewellery, textiles, leather, footwear, sports goods, plastics, furniture, agricultural products, and engineering products, among others.
India, in turn, has eased tariffs on 77.79% of its total tariff lines while safeguarding sensitive sectors such as agricultural products—including dairy, tea, coffee, rubber, and tobacco—along with gold and silver bullion, and jewellery. Under the services sector agreement, Oman has raised the quota for Intra-Corporate Transferees from 20% to 50%. Commerce Minister Piyush Goyal described the pact as a landmark in the bilateral relationship and noted that it is Oman’s first trade agreement in nearly two decades. He added that both countries can collaborate on energy transition initiatives, including green hydrogen, renewable energy, and infrastructure development.
The Ministry of Commerce and Industry stated, “For the first time, Oman has made extensive commitments under Mode 4, including a significant increase in the quota for Intra-Corporate Transferees from 20% to 50%, along with a longer permitted stay for Contractual Service Suppliers, extended from the existing 90 days to two years, with the option of a further two-year extension.”
The Ministry added that the agreement also allows more liberal entry and stay conditions for skilled professionals in key sectors such as accountancy, taxation, architecture, and medical and allied services, facilitating deeper and smoother professional engagement.
“The CEPA allows for 100% Foreign Direct Investment by Indian companies in major services sectors in Oman. Both countries have agreed to hold future discussions on social security coordination once Oman’s contributory social security system is implemented,” the Ministry noted.
Oman’s total annual imports are approximately $40 billion, with nearly two-thirds comprising machinery goods, offering India potential market access. Indian exports, primarily machinery and parts, have doubled over the past five years from $2 billion to $6 billion. India’s top exports to Oman include machinery, aircraft, rice, iron and steel products, beauty and personal care items, and ceramics.
According to the government, the CEPA is expected to achieve three key outcomes: strengthen and further develop closer economic and commercial integration, boost trade between the two countries by reducing barriers and creating a stable framework, and unlock opportunities across major sectors, thereby enhancing economic growth, generating jobs, and increasing investment flows between both nations.
Ajay Srivastava, former trade officer and head of the think tank Global Trade Research Initiative (GTRI), noted that while over 80% of Indian goods already enter Oman at an average tariff of around 5%, some items face duties as high as 100%.
“Their removal under the CEPA is expected to enhance price competitiveness for Indian exporters, although growth prospects may be limited by the size of Oman’s domestic market,” he added.
Oman’s benefits are primarily in energy and industrial inputs. India has liberalised tariffs on approximately 78% of its tariff lines, mainly through tariff-rate quotas to safeguard sensitive sectors. In fiscal 2025, India imported around $6.6 billion worth of goods from Oman, dominated by crude oil, liquefied natural gas, and fertilisers, along with chemical inputs such as methanol and ammonia, Srivastava said.
S C Ralhan, president of the Federation of Indian Export Organisations (FIEO), emphasized that Oman’s strategic location makes it a key gateway to the Gulf and Africa. He said the CEPA will allow Indian exporters to better integrate into regional value chains, diversify markets, and expand India’s export footprint.
With bilateral trade already surpassing $10 billion, the agreement offers a robust platform for accelerated growth in merchandise trade. “The CEPA also includes ambitious, forward-looking commitments in services, covering 127 sub-sectors such as IT and computer-related services, business and professional services, R&D, education, health, and audio-visual services, creating high-value opportunities for Indian service providers,” he added.
Explained: India’s footprint in West Asia
With Oman granting zero-duty access on 98% of its tariff lines, the pact is expected to enhance competitiveness for Indian industrial exports. This marks India’s second agreement with a Gulf Cooperation Council (GCC) member, following the CEPA with the UAE in 2022. Other GCC members include Bahrain, Kuwait, Qatar, and Saudi Arabia.
Prime Minister Modi arrived in Oman on Wednesday after visits to Jordan and Ethiopia. CEPA negotiations formally began in November 2023 and were concluded this year.
Over 6,000 India-Oman joint ventures operate in Oman. The Oman-India Joint Investment Fund (OIJIF), a 50-50 joint venture between the State Bank of India and the Oman Investment Authority, was established as a special purpose vehicle (SPV) to invest in India. It has fully deployed $320 million, with the third tranche of $300 million currently under implementation.
The Oman India Fertilizer Company (OMIFCO), located in Sur, is a $969-million joint venture between Oman Oil Company, IFFCO, and KRIBHCO.
In addition to the CEPA, the two countries signed five agreements covering maritime heritage and museums, agriculture, higher education, food innovation, and maritime cooperation.
Sultan Haitham bin Tarik awarded Prime Minister Modi the Order of Oman for his “exceptional contribution to India-Oman ties and his visionary leadership,” according to a statement from the PMO.