India and Oman close to signing a free trade deal
Financial Express | 7 June 2024
India and Oman close to signing a free trade deal
by Huma Siddiqui
India and Oman are on the brink of finalizing a trade agreement. The negotiations are complete, and the signing is expected after the formation of a new central government soon in India. This agreement aims to make it easier for both countries to access each other’s markets, promising significant economic benefits.
Benefits of the Agreement
The proposed Comprehensive Economic Partnership Agreement (CEPA) will help boost Indian exports to Oman by eliminating duties on various products such as petroleum, textiles, electronics, pharmaceuticals, machinery, and iron and steel. This is strategically important for India because of Oman’s location near the Strait of Hormuz, a crucial oil transit point, and because of its sizable Indian expatriate population.
Objectives of India and Oman
India is looking to reduce tariffs on its exports, including rice, pharmaceuticals, petroleum, and steel products. Additionally, India wants better access for its professionals, such as doctors, nurses, and engineers, to work in Oman. On the other hand, Oman aims to enhance its access to the Indian market for products like downstream petroleum, fertilizer, and iron and steel.
Bilateral Trade Talks
The first round of bilateral trade talks took place in New Delhi from November 27-29, 2023, followed by a second round in Muscat, Oman, from December 9-14, and a third round on January 16. These discussions have paved the way for a comprehensive trade deal that will enhance commercial and business engagements between the two nations.
Current Trade Relations
In the fiscal year 2022-23, bilateral trade between Oman and India was valued at $12.39 billion. Indian exports to Oman increased from $2.25 billion in 2018-19 to $4.48 billion in 2022-23, making up 6.6 percent of Oman’s imports. However, India has a trade deficit with Oman, as Omani exports to India amounted to $8 billion in the same period.
Importance of the Omani Market
Oman is a significant market for India among the Gulf Cooperation Council (GCC) countries, which also includes the UAE, Saudi Arabia, Qatar, Kuwait, and Bahrain. Oman’s GDP is approximately $115 billion, and its population of five million has a high per capita income of $25,060, compared to India’s $2,370. This indicates a higher spending power and potential demand for a wider range of goods and services from India.
Recent Developments
In December 2023, Sultan Haitham bin Tarik visited India, marking the first visit by an Omani ruler since 1997. He discussed the CEPA deal with Prime Minister Narendra Modi, along with a new US$300 million investment for the Oman India Joint Investment Fund and the possibility of conducting bilateral trade in rupees. This joint investment fund, a venture between the State Bank of India and Oman Investment Authority, aims to invest in India’s growing sectors.
Future Prospects
The India-Oman talks also covered areas such as space cooperation, satellite building and launching, green hydrogen and renewable energy, and financial technologies. Following the Sultan’s visit, Oman allocated an exclusive zone for India at the strategically important Duqm port. This zone will facilitate logistics and commercial cargo handling, humanitarian purposes, and the docking of warships.
