India and Oman are on the verge of finalizing a Comprehensive Economic Partnership Agreement (CEPA) following the conclusion of negotiations. This anticipated agreement, set to be signed after the formation of a new central government in the coming months, aims to bolster Indian exports to Oman by eliminating tariffs, particularly on key sectors such as petroleum products, textiles, electronics, pharmaceuticals, machinery, and iron and steel, according to informed sources.
The general elections start on 19 April and counting of votes starts on 4 June. Oman is India's third-largest export destination among Gulf Cooperation Council (GCC) countries with bilateral trade standing at $12.39 billion in FY2023, up from $5 billion in FY2019. India's exports to Oman have increased from $2.25 billion in FY2019 to $4.48 billion in FY2023.
Currently, more than 80% of Indian exports to Oman are subject to an average 5% import duty, amidst Oman's diverse import duties ranging from 0% to 100%, including specific duties. Notably, a 100% duty applies to certain meats, wines, and tobacco products. Following the agreement's signing, India endeavors to significantly enhance its exports to Oman, with provisions addressing labor mobility concerns also incorporated within the deal.
"Investments will go both ways. We expect significant growth across 7,000 trade lines (products) that currently attract 5% duty in Oman", the person added. There are plans for Indian companies to process aluminium and steel in Oman before exporting them to third countries due to lower energy costs in the West Asian country. "After the FTA, big Indian business conglomerates will set up their units and export green goods to European markets", the person mentioned above added.
"The presence of over 6,000 India-Oman joint ventures, with substantial Indian investment in Oman's Sohar and Salalah Free Zones, underscores the depth of economic engagement. Moreover, the FTA serves as a strategic lever for India to expand its influence and strengthen relationships within the broader Middle Eastern region", said Ajay Srivastava, founder of the economic think tank Global Trade Research Initiative (GTRI).
"This agreement will not only boost trade and investment opportunities but also contribute to India's geopolitical objectives, offering a balanced approach to its trade relations with Oman", Srivastava added. The FTA is also expected to help Oman diversify its economy away from its reliance on oil exports. By granting preferential access to Indian goods and services, Oman will benefit from India's expertise in various industries.
During the fiscal year 2023, India recorded merchandise imports worth $7.9 billion from Oman, with service imports amounting to $0.6 billion. Notably, India holds a significant position as a major importer of petroleum products, liquefied natural gas (LNG), gaseous hydrocarbons, and chemical fertilizers from Oman.