On Thursday, December 18, the second day of Prime Minister Narendra Modi’s visit to the Gulf country Oman, a trade agreement is going to be signed. Under this deal, exports worth more than $3 billion to Oman can be duty free. This duty free export will include Indian textiles, chemicals and other goods. This agreement will boost trade, as about 83.5 percent of Indian exports worth $3.42 billion in FY 2025 were subject to a duty of about 5 percent in Oman. Commerce Minister Piyush Goyal said on December 17 that it will be an important day when, in front of both our leaders, we will have the privilege of signing the first free trade agreement that Oman has signed with any country in almost 20 years. Modi reached Muscat on Wednesday for the final phase of his three-nation tour, in which he also visited Ethiopia and Jordan.
How is bilateral trade?
Although bilateral trade between India and Oman is set to cross the $10 billion mark in FY2025, India’s exports of $4.1 billion have considerable scope for expansion in high-value sectors such as engineering goods, automobiles, pharmaceuticals, food products, textiles and electronics. During the same period, India imported goods worth $6.6 billion from Oman, resulting in a trade deficit of $2.5 billion. There was a slight decline in India’s exports to Oman in the last financial year, which were $ 4.48 billion in FY 2023 and $ 4.43 billion in FY 2024. Imports increased by about 45 percent in 2023-24.
You can get relief on these
Oman’s largest export commodity, petroleum exports, valued at $1.43 billion, is largely duty free. However, key sectors such as engineering goods ($812.2 million) and chemicals ($241.4 million), as well as partially tariffed minerals such as mica, coal and other ores ($428.6 million) could directly benefit from the proposed trade agreement. Labor-intensive exports like textiles, which currently attract heavy tariffs in the US, are also expected to benefit from the trade agreement due to the removal of tariffs. In FY2025, India exported readymade garments worth $63.8 million to the Gulf country, the largest item in this category. Import duties in Oman range from zero to 100 percent, with higher duties on certain meat, alcohol and tobacco products.
When did the India-Oman FTA start?
Talks for a free trade agreement between India and Oman began in November 2023. The agreement, named Comprehensive Economic Partnership Agreement (CEPA), took five rounds of face-to-face talks between the two sides, with the last one held in New Delhi in January. CEPA negotiations ended in approximately August. Efforts to conclude a trade agreement with the other Gulf country are being made after India’s CEPA with the UAE, which was signed on February 18, 2022 and came into effect from May 1, 2022. India is also expected to start trade talks with Qatar, the third country of the Gulf Cooperation Council, soon.