ANALYSIS Over $3 billion of Indian exports could become tariff-free under FTA with Oman

Total trade between India and Oman stood at $10.61 billion in 2024-25, a growth of 18.6 percent on-year.

Indian textiles, chemicals and other exports worth more than $3 billion to Oman could become tariff-free, with New Delhi and Muscat set to sign a trade deal on December 18, the second day of Prime Minister Narendra Modi’s visit to the Gulf nation.

The agreement will provide a boost to trade as around 83.5 percent of Indian exports, valued at $3.42 billion in FY25, face a tariff of about 5 percent in Oman.

“Tomorrow will be an instrumental day when, before our two leaders, we will have the privilege of executing the first free trade agreement Oman is going to sign with a country nearly 20 years later," commerce minister Piyush Goyal said on December 17.

Modi arrives in Muscat later in the day on the final leg of his three-nation tour which also saw him visit Ethiopia and Jordan.

Though bilateral trade between India and Oman crossed the $10-billion mark in FY25, India’s exports at $4.1 billion have significant headroom to expand 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.

India’s exports to Oman in the previous fiscal saw a small dip from $4.48 billion in FY23 and $4.43 billion in FY24. Imports jumped an almost 45 percent due to a sharp contraction in 2023-24.

While petroleum exports, the largest item shipped to Oman, valued at $1.43 billion, are largely duty-free, key sectors such as engineering goods ($812.2 million) and chemicals ($241.4 million), along with partially duty-bearing minerals like mica, coal, and other ores ($428.6 million), could benefit directly from the proposed trade deal.

Labour-intensive exports such as textiles, which now face steep tariffs in the US, are also expected to benefit from the trade deal due to tariff elimination.

In FY25, India shipped ready-made garments worth $63.8 million to the Gulf nation, the largest item in the category.

Oman’s import duty ranges from zero to 100 percent along with steeper tariffs on specific meats, wines and tobacco products.

India-Oman FTA

Talks for a free trade agreement between India and Oman began in November 2023.

Termed as a Comprehensive Economic Partnership Agreement (CEPA), both sides have held five rounds of in-person negotiations, with the last one held in New Delhi in January.

CEPA negotiations concluded around August.

Attempts to broker a trade deal with a second Gulf nation follows India’s CEPA with United Arab Emirates, which was signed on February 18, 2022 and came into force from May 1, 2022.

India is also expected to soon begin trade talks with the third Gulf Cooperation Council nation, Qatar.