India and Oman Sign Trade Agreement: CEPA Deepens Bilateral Economic Engagement

The India–Oman CEPA establishes a comprehensive framework to deepen bilateral trade, services, and investment ties, while supporting India’s broader strategy of trade diversification amid US tariff challenges. By lowering tariff barriers, liberalizing services, and enhancing professional mobility, the agreement creates new opportunities for businesses to integrate into regional supply chains and expand across the Middle East, Africa, and beyond.

On December 18, 2025, India and Oman signed a Comprehensive Economic Partnership Agreement (CEPA) aimed at strengthening bilateral trade and investment ties and formalizing economic cooperation across goods, services, and professional mobility. The agreement was concluded in Muscat amid India’s broader efforts to deepen engagement with Middle Eastern economies and diversify its trade relationships in response to growing global trade pressures.

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Under the CEPA, Oman has committed to granting duty-free access on more than 98 percent of its tariff lines, covering nearly all Indian exports by value, while India will reduce or eliminate tariffs on approximately 78 percent of its tariff lines, accounting for almost 95 percent of imports from Oman. With bilateral trade exceeding US$10 billion annually, the agreement provides a structured framework to expand trade volumes, enhance investment flows, and reduce market access barriers.

The CEPA also carries strategic significance for India, as Oman occupies a critical position along the Strait of Hormuz, a key transit route for global energy shipments. Beyond trade liberalization, the agreement reflects a convergence of economic and geopolitical interests, positioning Oman as an important partner in India’s broader Gulf and West Asia economic strategy.

In this article, we consider the key provisions of the India–Oman CEPA, assess its implications for bilateral trade and services, and analyze what the agreement means for businesses and investors operating in or looking to enter both markets.

India–Oman trade relations: Current structure and dependencies

Bilateral trade between India and Oman reached approximately US$10.6 billion in FY 2024–25, with India running a trade deficit largely due to energy and fertilizer imports.

India’s exports to Oman are relatively diversified but remain concentrated in petroleum products, processed minerals, agricultural commodities such as basmati rice, and select manufacturing categories.

Imports from Oman to India are dominated by crude oil, petroleum gas, fertilizers, ammonia, and chemical products.

According to a bilateral note issued by the Embassy of India in Muscat in November 2025, Oman ranked as India’s 29th largest export destination and 25th largest source of imports in FY 2024-25, making it India’s 28th largest trading partner overall during the same period. In turn, India emerged as Oman’s fourth-largest source of non-oil imports and its third-largest destination for non-oil exports in FY 2024-25.

Scope of the India–Oman CEPA and tariff liberalization commitments

The India-Oman CEPA establishes a wide-ranging framework for tariff liberalization across goods trade, reflecting a calibrated approach to market opening by both countries.

The agreement has been concluded at a time when Indian exporters are facing increasing trade constraints in traditional Western markets, including higher tariffs in the United States (US) and expanding regulatory requirements in the European Union (EU), such as the carbon border adjustment mechanism. In response, India has accelerated the negotiation of bilateral trade agreements to diversify export destinations and reduce exposure to protectionist measures.

Under the CEPA:

• Oman has committed to eliminating customs duties on more than 98 percent of its tariff lines, covering over 99.38 percent of Indian exports by value; and
• India will liberalize tariffs on approximately 78 percent of its tariff lines, accounting for nearly 95 percent of imports from Oman.

This asymmetric but reciprocal structure is intended to expand market access while preserving flexibility for sensitive sectors.

The pact also grants immediate tariff eliminations on 97.96 percent of tariff lines to India from Oman. India’s labour-intensive sectors, including textiles, gems and jewellery, leather, footwear, sports goods, furniture, agriculture, engineering products, pharmaceuticals, medical devices, and automobiles, are expected to benefit the most.

For India, this translates into improved export margins, stronger support for MSMEs and employment-intensive industries, and reduced reliance on traditional markets amid increasing global trade fragmentation.

At the same time, the agreement reflects a selective approach to liberalization. India has excluded several product categories from tariff concessions, including key agricultural goods, precious metals, and certain labor-intensive industries, underscoring a sector-specific strategy aimed at balancing trade openness with domestic industry protection.

Following the India–UAE CEPA signed in 2022, the Oman agreement represents India’s second comprehensive trade pact in the Middle Eastern region, signaling a broader shift toward bilateral arrangements as a core instrument of its regional trade strategy.

Impact on merchandise trade and industrial sectors

The India–Oman CEPA is expected to have its most immediate impact on India’s merchandise exports to Oman by improving price competitiveness across a range of labor-intensive and manufacturing sectors that already feature prominently in bilateral trade. Specifically, Indian exports which are likely to benefit from reduced landed costs in the Omani market include:

• Textiles and ready-made garments;
• Gems and jewelry;
• Engineering goods;
• Pharmaceuticals;
• Medical devices;
• Automobiles;
• Plastics; and
• Furniture.

Indeed, these sectors are closely aligned with India’s manufacturing base and MSME-driven export ecosystem, where tariff sensitivity remains high.

In addition to industrial goods, the agreement strengthens India’s position in select agri-food segments where it is already a major supplier to Oman. India currently accounts for a significant share of Oman’s agricultural imports, with key export items including, among others:

• Basmati and parboiled rice;
• Onions;
• Bananas;
• Cashew kernels;
• Sweet biscuits;
• Mixed condiments; and
• Select meat and dairy-related products.

From Oman’s perspective, improved access to the Indian market supports the continued flow of:

• Crude oil;
• Liquefied natural gas;
• Fertilizers; and
• Chemical inputs such as ammonia and methanol.

many of these products already face relatively low tariffs, the agreement provides a more predictable framework for trade in energy and resource-based goods.

Over the medium term, the CEPA may also facilitate greater downstream and value-added industrial cooperation, particularly as Oman seeks to reduce reliance on raw hydrocarbon exports and expand manufacturing and processing activities under its economic diversification strategy.

Services trade and investment liberalization

A defining feature of the India–Oman CEPA is its comprehensive services chapter. Oman has offered market access commitments across a broad range of services sectors, including:

• IT and computer-related services;
• Professional and business services;
• Education;
• Healthcare;
• Research and development; and
• Audio-visual services.

Importantly, the agreement also allows for 100 percent foreign direct investment (FDI) by Indian companies in major services sectors through commercial presence. This provision is expected to encourage Indian firms to establish operations in Oman, using the country as a base for serving Gulf and African markets.

Mobility of professionals and workforce cooperation

The CEPA introduces one of Oman’s most liberal mobility frameworks to date.

Commitments under Mode 4 include a substantial increase in quotas for intra-corporate transferees and longer permitted stays for contractual service suppliers. The Mode 4 framework extends the permitted stay for contractual service suppliers from 90 days to up to four years.

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More flexible entry and residency conditions for professionals in sectors such as accountancy, taxation, architecture, and healthcare are expected to reduce operational frictions for Indian firms and strengthen people-to-people economic linkages. These provisions address long-standing mobility barriers faced by Indian professionals, support India’s global skilled workforce strategy, and strengthen economic linkages by benefiting the Indian diaspora of nearly 700,000 people in Oman’s economy.

Discussions on social security coordination, once Oman’s contributory system is implemented, could further institutionalise labour mobility.

Strategic and regional implications of the India-Oman CEPA

Beyond bilateral trade, the CEPA has broader regional significance:

• Oman’s geographic position and logistics connectivity make it a natural gateway to the Gulf Cooperation Council (GCC), East Africa, and parts of Central Asia; meanwhile
• For India, the agreement complements its CEPA with the United Arab Emirates and reinforces its broader West Asia trade and investment strategy.

The deal also signals Oman’s willingness to engage in deeper economic integration with Asian growth markets, balancing its traditional energy-export relationships with new trade and investment partnerships.

Key takeaways: What the CEPA means for businesses

The India–Oman CEPA provides a clearer and more predictable framework for companies engaged in trade, services, and investment between the two countries. By eliminating or reducing tariffs across the majority of traded goods and establishing defined rules for services and professional mobility, the agreement lowers entry costs and reduces regulatory uncertainty for businesses on both sides.

Companies that align their market strategies early with the CEPA’s provisions are likely to capture first-mover advantages, particularly in price-sensitive and high-growth sectors.

• For Indian exporters: The agreement enhances competitiveness in the Omani market across labor-intensive and manufacturing sectors where tariff elimination directly improves margins. Firms exporting textiles, garments, gems and jewelry, engineering goods, pharmaceuticals, medical devices, automobiles, and processed food products can benefit from lower landed costs and more stable market access. Given Oman’s relatively small domestic market, exporters are likely to maximize gains by targeting niche demand segments, upgrading product quality, and leveraging Oman’s logistics and free zone infrastructure to access neighboring Gulf and African markets.
• For Indian service providers and investors: The CEPA offers expanded opportunities through liberalized market access and the ability to establish 100 percent foreign-owned operations in key services sectors. Companies in IT, professional services, healthcare, education, research and development, and specialized business services can use Oman as a regional operating base, supported by improved mobility provisions for intra-corporate transferees and contractual service suppliers. The extended duration of stay and increased quotas under Mode 4 reduce operational friction and support longer-term project deployment.
• For Omani exporters and investors: The agreement strengthens access to the Indian market, particularly for energy, fertilizers, and chemical inputs, while providing a more stable framework for expanding downstream and value-added industrial activities. Indian demand for energy and industrial inputs remains structurally strong, and the CEPA improves predictability for long-term supply arrangements. Omani firms exploring joint ventures or manufacturing partnerships in India may also benefit from India’s broader network of free trade agreements, which can support export-oriented production.

In conclusion, from an investment and supply chain perspective, the CEPA supports deeper bilateral integration by encouraging joint ventures, contract manufacturing, and regional distribution strategies.

Businesses on both sides should assess how the agreement interacts with existing free zones, logistics hubs, and special economic zones, as well as with India’s and Oman’s respective industrial and diversification policies. Over time, the India–Oman CEPA is likely to favor firms that combine tariff advantages with localized presence, compliance readiness, and regional market integration.

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