India eyes trade pact with Oman amid turmoil, FTA starts June 1

What Happened

• The Comprehensive Economic Partnership Agreement (CEPA) between India and Oman, signed in December 2025, is set to come into force from 1 June 2026, marking India's second CEPA with a Gulf Cooperation Council (GCC) member state.
• Oman will provide duty-free access on 98.08% of its tariff lines, covering 99.38% of India's current exports to Oman by value — one of the most comprehensive market access offers extended to India by any trade partner.
• In exchange, India will liberalise tariffs on approximately 77.79% of its tariff lines, accounting for nearly 95% of current imports from Oman.
• Indian sectors set to gain significantly include textiles and ready-made garments, leather and footwear, gems and jewellery, engineering products, pharmaceuticals, medical devices, chemicals, plastics, automobiles and auto components, furniture, and marine and agricultural products.
• The CEPA also covers trade in services, investment promotion, regulatory cooperation, and enhanced professional mobility — including extended stay provisions for contractual service suppliers and intra-corporate transferees.
• The agreement opens 100% foreign direct investment opportunity in select services sectors from each country into the other's market.
• India is simultaneously eyeing a broader, more comprehensive trade pact with Oman beyond the CEPA, even as the current agreement is implemented — set against the backdrop of regional geopolitical turmoil affecting Gulf supply chains.

Static Topic Bridges

Comprehensive Economic Partnership Agreements (CEPAs): India's GCC Strategy

India has been systematically building CEPA architecture with Gulf Cooperation Council (GCC) member states since 2022. The UAE-India CEPA, signed on 18 February 2022 and in force from 1 May 2022, was the first and demonstrated rapid results — bilateral trade nearly doubled within two years. India-Oman CEPA (signed December 2025; in force June 2026) is the second. CEPAs differ from conventional FTAs by encompassing services, investment, digital trade, government procurement, and regulatory cooperation in addition to goods tariffs — making them "21st century" trade architecture rather than simply tariff-reduction schedules.

India-Oman Bilateral Relations: Strategic Depth Beyond Trade

India and Oman share one of the most comprehensive bilateral relationships in the Gulf. The Joint Military Cooperation Committee (JMCC) between India and Oman is the longest-running defence cooperation mechanism with any Gulf state, operational since 1980. India has access agreements with Oman's Duqm Port and Salalah Port, enabling Indian naval vessels to replenish and maintain. Oman's geographic position at the mouth of the Strait of Hormuz — through which approximately 20% of the world's oil transits — gives the bilateral relationship strategic weight beyond trade. India's diaspora in Oman numbers approximately 700,000 people, making remittances and labour mobility key dimensions of the relationship.

Rules of Origin and Sensitive Lists in Indian FTAs

A recurring challenge in India's trade agreements has been the misuse of rules of origin provisions and the exclusion of sensitive sectors. Rules of origin (RoO) determine which goods qualify for preferential tariff rates under an FTA — preventing "tariff shopping" where goods from third countries are routed through FTA partners to access reduced duties. India's earlier FTAs (ASEAN, SAFTA) suffered significant import surges due to weak RoO provisions, particularly in edible oils, electronics, and textiles. The CEPA model — pioneered with UAE — incorporates stricter value addition criteria and product-specific rules to prevent such circumvention. Sensitive lists (items excluded from tariff liberalisation) protect domestic industries; India's sensitive list in the Oman CEPA covers dairy, certain agricultural products, and some chemicals.

Gulf Geopolitics and India's Energy-Trade Calculus

The Gulf region supplies approximately 60% of India's crude oil imports and hosts over 9 million Indian diaspora members, who remit approximately USD 40 billion annually — the largest source of remittances to India. Regional turmoil (conflicts, sanctions, maritime disruptions in the Red Sea and Strait of Hormuz) creates supply chain risks for India. The India-Oman CEPA acquires additional urgency in this context: Oman's relative political stability, its non-involvement in Gulf factional disputes, and its role as a diplomatic back-channel (particularly for Iran dialogue) make it a stable anchor for India's Gulf economic integration strategy.

Key Facts & Data

• India-Oman CEPA signed: December 2025; in force: 1 June 2026
• Oman's tariff liberalisation: 98.08% of tariff lines (covering 99.38% of India's exports by value)
• India's tariff liberalisation: 77.79% of tariff lines (covering ~95% of imports from Oman by value)
• This is Oman's first bilateral trade agreement since 2006
• India-UAE CEPA (May 2022): the precedent — bilateral trade nearly doubled within two years
• India-Oman bilateral trade: approximately USD 12 billion (2025)
• Indian diaspora in Oman: approximately 700,000; annual remittances approximately USD 3 billion
• JMCC (India-Oman defence): operational since 1980 — oldest Gulf defence mechanism for India
• Strait of Hormuz: ~20% of global oil and ~25% of global LNG transits through Oman's adjacent waters
• GCC members with Indian CEPA: UAE (2022), Oman (2026); Qatar and Bahrain under negotiation