The Oman CEPA, a new gateway for India’s exports

UPSC Syllabus: Gs Paper 2- International relation

Introduction

The India–Oman Comprehensive Economic Partnership Agreement (CEPA), which entered into force on 1 June 2026, marks a major step in strengthening economic ties between the two countries. Building on centuries-old trade and maritime relations, the agreement provides a comprehensive framework covering trade, services, investment, mobility and regulatory cooperation. By offering extensive market access and facilitating business operations, the CEPA is expected to expand India’s export opportunities while strengthening its economic presence in the Gulf region.

Major Provisions of the CEPA

1. Comprehensive Economic Framework: The agreement covers goods, services, investment, professional mobility, regulatory cooperation and non-tariff barrier safeguards. It moves beyond traditional tariff-focused trade agreements.
2. Extensive Duty-Free Access: Oman has provided duty-free access on 98.08% of tariff lines, covering 99.38% of India’s exports by value. Earlier, only 15.33% of India’s exports entered Oman duty-free under the MFN regime.
3. Immediate Tariff Benefits: All zero-duty concessions become effective immediately. This provides certainty and stronger competitiveness for Indian exporters in the Omani market.
4. Balanced Market Opening by India: India has offered tariff liberalisation on 77.79% of tariff lines, covering 94.81% of imports from Oman by value. Sensitive sectors remain protected through exclusions and safeguards.
5. Protection of Sensitive Sectors: Dairy products, cereals, fruits, vegetables, edible oils, oilseeds, spices, rubber, leather and several agricultural products are excluded from tariff concessions. This protects domestic producers and rural livelihoods.
6. Special Safeguard Mechanisms: Tariff Rate Quotas and Minimum Import Price provisions have been included for selected products. These measures help safeguard domestic industries from import-related pressures.

Benefits for India’s Goods Exports

1. Textiles and Apparel Advantage: India already accounts for 43% of Oman’s woven apparel imports and 31% of knitted apparel imports. Removal of the existing 5% tariff improves competitiveness against major suppliers such as China.
2. Stronger Position in Chemicals: India supplies nearly 39% of Oman’s inorganic chemical imports. Duty-free access further strengthens India’s position in this market.
3. Growth in Engineering Goods: Oman imports over $3.7 billion of mechanical machinery and $3.3 billion of automobiles annually. India’s market share remains only 5% and 2%, creating large expansion opportunities.
4. Pharmaceutical Market Expansion: Indian pharmaceutical products gain regulatory advantages through faster approvals and reduced compliance burdens. This supports greater participation in Oman’s growing pharmaceutical market.
5. Boost to Agriculture and Food Products: Products such as meat, eggs, honey, butter, processed foods, rice, cashews and condiments receive stronger market access. India already holds dominant shares in several agricultural products imported by Oman.
6. New Opportunities for Marine Exports: All marine products, including shrimp, fish and cuttlefish, receive immediate duty-free access. This creates export opportunities for coastal states such as Andhra Pradesh, Kerala, Tamil Nadu and Gujarat.
7. Expansion of Gems and Jewellery Exports: Import duties of up to 5% have been removed. Indian exporters gain a competitive advantage in Oman’s $1.07 billion jewellery import market.

Benefits for Services and Professional Mobility

1. Large Untapped Services Market: Bilateral services trade stood at $863 million in 2024, with India enjoying a surplus of nearly $447 million. Yet India accounts for only about 5.31% of Oman’s global services imports.
2. Wide Sectoral Coverage: Oman has undertaken commitments across 127 services sub-sectors. These include information technology, healthcare, education, engineering, finance, tourism and telecommunications.
3. Professional Access Commitments: Binding commitments have been provided for professionals in accounting, engineering, medicine, IT, education and construction. This creates new opportunities for skilled Indian workers.
4. Greater Mobility for Professionals: Oman has increased quotas for intra-corporate transferees and created clear mobility pathways. Business visitors, independent professionals and specialists receive defined stay provisions.
5. Support for Joint Ventures: Enhanced mobility provisions benefit nearly 6,000 India–Oman joint ventures. Easier movement of professionals strengthens business operations and investments.
6. Opportunities in AYUSH and Wellness: Dedicated provisions relating to AYUSH and traditional medicine support expansion of Indian healthcare and wellness services in the Gulf region.

Trade Facilitation Measures

1. Recognition of Indian Certifications: Oman will accept certificates issued by India’s Export Inspection Council (EIC). This removes duplicative testing and inspection requirements.
2. Acceptance of Organic and Halal Standards: Oman recognises India’s National Programme for Organic Production (NPOP) certification and halal certification systems. This improves market access for certified products.
3. Dedicated SPS (Sanitary and Phytosanitary) Provisions: Specific sanitary and phytosanitary provisions promote transparency and cooperation. These measures reduce regulatory uncertainty for exporters.
4. Technical Barriers to Trade (TBT)Cooperation: Dedicated TBT provisions help address non-tariff barriers and improve regulatory coordination between both countries.
5. Faster Customs Procedures: Streamlined customs processes reduce administrative delays. This lowers transaction costs for exporters.
6. Fast-Track Clearance for Perishables: Special clearance mechanisms for perishable products improve export efficiency and reduce spoilage-related losses.

Strategic Significance of Oman for India

1. Gateway to the Gulf and East Africa: Oman serves as India’s gateway to the wider Gulf Cooperation Council (GCC) region and East African markets. Its location strengthens India’s regional economic outreach.
2. Strategic Maritime Position: Oman sits at the crossroads of the Gulf, the Indian Ocean and East Africa. This gives it significant geoeconomic importance.
3. Advanced Port Infrastructure: Ports at Sohar, Duqm and Salalah are emerging as major logistics and industrial hubs. They improve access to regional markets.
4. Support for Global Value Chains: The agreement aligns with India’s efforts to integrate more deeply into global value chains. It supports diversification of trade partnerships.
5. Expansion of India’s Gulf Presence: The CEPA strengthens India’s economic and strategic footprint in a region important for trade, connectivity and energy interests.
6. Modern Trade Architecture: The agreement reflects India’s shift from tariff negotiations towards broader economic partnerships covering trade, services, investment and mobility.

Potential Impact on India’s Economy

1. Support for Labour-Intensive Sectors: Textiles, gems and jewellery, leather, footwear, marine products and processed foods are expected to gain from improved market access.
2. Benefits Across States: Gains are expected for textile clusters in Tamil Nadu, gems and jewellery industries in Gujarat, engineering hubs in Maharashtra and Punjab, pharmaceutical manufacturers in Telangana, and seafood exporters in Andhra Pradesh and Kerala.
3. Stronger MSME Competitiveness: Better market access, reduced compliance costs and regulatory certainty can improve the performance of Indian MSMEs.
4. Employment and Investment Opportunities: Expansion of exports and manufacturing activity can support job creation and attract greater investment.
5. Deeper Economic Integration: The agreement strengthens trade, services, logistics and investment linkages between India and the Gulf region.

Limitations of the India–Oman CEPA

1. Limited Size of Oman’s Market: Oman’s population is around 55 lakh, which limits the overall scale of export expansion compared to larger markets. Even with duty-free access, demand growth has natural limits.
2. Small Presence in Some High-Value Sectors: India’s presence remains low in sectors such as premium gems and jewellery. Exporters will need to build market networks and consumer demand to achieve significant growth.
3. Exposure to Regional Instability: Oman’s strategic location is an advantage, but trade routes remain linked to the wider Gulf region. Any disruption around the Strait of Hormuz can affect maritime trade and logistics.
4. Energy Dependence Challenges Remain: The agreement diversifies trade relations but does not eliminate India’s broader dependence on Gulf-region energy supplies and geopolitical developments.
5. Non-Tariff Barriers May Continue: Tariff reductions alone cannot remove all regulatory requirements, compliance procedures and administrative barriers. Some export challenges may continue despite the agreement.
6. Need for Better Logistics Connectivity: The full benefits of the CEPA depend on improvements in warehousing, shipping links and industrial cooperation. Weak logistics can reduce the gains from market access.
7. Implementation and Utilisation Risks: The agreement’s success depends on how effectively businesses use the available opportunities. Under-utilisation can limit the expected trade gains.

Conclusion

The India–Oman CEPA represents a significant expansion of India’s trade and economic engagement with the Gulf region. Through greater market access, stronger services commitments, improved trade facilitation and enhanced professional mobility, it creates new opportunities for businesses and exporters. However, its full benefits will depend on effective implementation, improved logistics and active participation by industry. If utilised well, it can strengthen India’s integration with regional and global value chains.

Question for practice:

Evaluate the significance of the India–Oman Comprehensive Economic Partnership Agreement (CEPA) in expanding India’s exports, strengthening services trade, and enhancing its strategic presence in the Gulf region.

Source: The Hindu