The much-anticipated free trade agreement between India and Oman is poised to deliver a significant boost to Indian industrial exports by eliminating or sharply reducing tariffs that currently range as high as 100 percent on certain goods. According to a detailed analysis by the Global Trade Research Initiative (GTRI), the pact, officially known as the Comprehensive Economic Partnership Agreement (CEPA), is expected to be signed soon, marking a major milestone in bilateral economic relations.
Key Tariff Reductions Under the India-Oman CEPA
The GTRI report highlights that Oman's current import duties present a substantial barrier for Indian goods. Oman imposes a 5 percent tariff on 76.4 percent of all tariff lines, affecting a wide range of products. However, the more prohibitive duties are found in specific sectors crucial to India's export ambitions. For instance, tariffs on certain textiles and garments can reach up to 15 percent, while duties on cars, alcoholic beverages, and some machinery items soar to 100 percent.
The new CEPA is designed to dismantle these barriers. The agreement will eliminate tariffs on a vast majority of Indian exports to Oman, making products like textiles, electronics, machinery, automobiles, and auto parts far more competitive in the Omani market. This move is expected to not only increase export volumes but also encourage Indian manufacturers to explore Oman as a strategic gateway to other markets in the region.
Strategic Importance and Economic Impact
Oman holds a unique and strategic position for India, both as a trade partner and a regional ally. Oman is India's third-largest export destination within the Gulf Cooperation Council (GCC) region, with bilateral trade reaching USD 12.39 billion in the 2022-23 financial year. Indian exports accounted for USD 4.48 billion of this total, while imports from Oman, dominated by crude oil, stood at USD 7.91 billion.
The trade balance, currently in Oman's favour due to energy imports, is expected to see a positive shift for India as the FTA facilitates greater outflow of finished goods and services. Beyond goods, the agreement is also likely to cover areas like services, investments, and technical standards, creating a more comprehensive economic partnership. This deal follows India's successful CEPA with the UAE and underscores its strategy to deepen economic ties with key Gulf nations.
Opportunities for Key Indian Sectors
The GTRI analysis pinpoints several sectors that stand to gain immensely from the tariff concessions. The textile and apparel industry, facing a 15 percent duty, will find a more level playing field. Similarly, the automotive sector, which includes passenger vehicles and auto components, will benefit from the removal of steep 10-15 percent tariffs. Other promising areas include:
- Electronics and Electrical Machinery: Gaining an edge against competitors.
- Chemicals and Pharmaceuticals: Expanding market access.
- Engineering Products: Enhancing export competitiveness.
- Agricultural Products: Potential for increased shipments.
The agreement will also provide a strong impetus for Indian service providers in sectors like IT, healthcare, and education to expand their footprint in Oman. With the formal signing expected imminently, businesses on both sides are advised to prepare for the new trade landscape that will emerge, characterized by reduced costs and increased market access.
In conclusion, the India-Oman CEPA represents a strategic economic win. By tackling high existing tariffs, it opens a clear pathway for Indian industrial exports to grow substantially, diversifying the trade basket and strengthening a crucial bilateral relationship in a geopolitically vital region.
