- Boost to Indian Exports: The India-Oman CEPA aims to eliminate import tariffs on various Indian products, enhancing export opportunities for sectors like petroleum, textiles, electronics, and pharmaceuticals.
- Geopolitical Impact: The agreement strengthens India’s presence in the Gulf Cooperation Council (GCC) region, crucial for energy security and expanding trade relations, particularly with Oman and other Gulf nations.
- Economic and Employment Growth: CEPA has the potential to generate employment in India by improving market access for Indian professionals in Oman and encouraging joint investments, despite current trade imbalances that need strategic addressing.
Introduction
India and Oman are reportedly at an advanced stage of negotiating enhanced economic cooperation through a Comprehensive Economic Partnership Agreement (CEPA). This agreement seeks to reduce various tariffs on various products and eliminate barriers to market access at both ends. The CEPA is especially beneficial for India, as Oman’s geographical location at the Strait of Hormuz—an important oil chokepoint—and the significant number of Indian expatriates residing there make it a strategic partner.
Economic Implications
The CEPA will mainly help Indian exports by eliminating import tariffs on products including petroleum, textiles, electronics, pharmaceuticals, machinery, and iron & steel. At present, 80 per cent of Indian goods imported into Oman are subject to an average import tariff of 5 per cent, which CEPA seeks to remove. This could lead to an increase in Indian exports, as overall exports have already registered good growth, rising from $2.25 billion in 2018-19 to $4.8 billion in 2022-23, making the total bilateral trade around $12.39 billion in the fiscal year 2022-23.
Oman, with a GDP of about $115 billion and a relatively high per capita income of $25,060, poses a promising market for India. CEPA is predicted to provide entry points for India’s exports and services, particularly in industries where Oman seeks to diversify its imports. Imports from India are expected to receive favorable treatment, with estimates suggesting that India will be able to export around $3.7 billion worth of goods, including motor gasoline, iron and steel, and electronics, with the realignment of duties.
Geopolitical Implications
The CEPA represents a positive shift for India in its relations with the member countries of the Gulf Cooperation Council (GCC), of which Oman is a part. This aligns well with India’s broader policy of enhancing its economic presence in the Gulf region, which is vital for energy security and access to foreign markets. The relationship between GCC countries—such as Oman, the UAE, and Saudi Arabia—and India is mutually beneficial, particularly in the context of Indian oil imports.
Moreover, the India-Oman CEPA is expected to improve direct connectivity through sea routes, making the UAE a transit country. This could enhance trade and strengthen the overall economic relationship. The willingness to expand cooperation in new fields, including artificial intelligence, healthcare, and space exploration, further underscores the proactive approach in bilateral relations.
National Implications for India
At the national level, the CEPA has the potential to generate employment and stimulate growth within the Indian economy. The ease of market access will benefit Indian professionals, such as doctors and engineers, who can address Oman’s domestic skill shortages while also contributing to the Omani economy. Furthermore, joint oil exploration and investment initiatives, like the Oman India Joint Investment Fund, will support growth across various sectors in India, thereby boosting the economy.
However, the agreement also presents challenges. Currently, India has a trade deficit with Oman: imports from Oman total $8 billion, while exports stand at $4 billion. To address this imbalance and ensure that CEPA delivers benefits to Indian industries and exporters, strategic planning and implementation will be essential.
Conclusion
The India-Oman CEPA is poised to be a landmark agreement, aimed at deepening annual exports, fostering investments, and strengthening India’s strategic influence in the Gulf. This agreement is likely to attract significant interest as trade talks conclude, and should it be signed, it could set a precedent for other regional trade partnerships.
References:
- India and Oman Close to Signing a Free Trade Deal-https://www.financialexpress.com/business/defence-nbspindia-and-oman-close-to-signing-a-free-trade-deal-3517378/
- India-Oman free trade pact talks at advanced stage, says Ambassador Mr. Amit Narang –https://www.ibef.org/news/india-oman-free-trade-pact-talks-at-advanced-stage-says-ambassador-mr-amit-narang
- India – Oman Bilateral Economic and Commercial Relations- https://www.indemb-oman.gov.in/eoi.php?id=trade
Prajwal K M