India-Oman Free Trade Agreement

India-Oman Free Trade Agreement

Why in News? 

India and Oman will sign a Free Trade Agreement (FTA) in Muscat on 18 December 2025 in the presence of Indian Prime Minister Narendra Modi. The agreement aims to expand trade opportunities and create a more predictable framework for long term commercial engagement between the two nations.

India–Oman Free Trade Agreement

• India and Oman moved to sign a Free Trade Agreement during a state visit in Muscat. The government finalised approval before the visit and signing took place as part of a bilateral visit on December 18, 2025.
• This is the first Free Trade Agreement (FTA) Oman has signed with any country in nearly 20 years. Formal talks for the FTA officially began in November 2923 and negotiations for the CEPA were concluded in August 2025.
• The pact targets goods and services across several priority areas. The agreement emphasises textiles, automobiles, food processing, gems and jewellery, agrochemicals, renewable energy, and auto components. The arrangement also seeks to open new lines of commercial cooperation.
• The pact is expected to make over $3 billion worth of Indian exports tariff-free. Currently, approximately 83.5% of Indian exports to Oman face a 5% tariff.
• India and Oman recorded robust trade before the pact. Bilateral trade reached US$10.61 billion in FY 2024-25. India exported manufactured goods and services to Oman. Oman exported oil and industrial inputs to India. The trade figures show a growing economic link that the agreement aims to deepen.
• The agreement covers tariff liberalisation for many product lines. It covers services liberalisation and rules for cross border trade in services. It sets rules of origin to determine which goods qualify for preferential rates. It contains provisions on investment facilitation and dispute settlement. 
• The agreement is part of India’s proactive trade diplomacy aimed at diversifying trade partners and strengthening India’s role in the Gulf economic ecosystem.

India–Oman Economic Relations

• Historical Economic Ties: India and Oman share a long history of economic contact that dates back over 5,000 years through trade and cultural exchange. Formal diplomatic relations were established in 1955 and have since expanded into deep economic cooperation. This long-standing relationship creates trust and continuity for both governments and business communities.

• Bilateral Trade Growth: Bilateral trade between India and Oman has shown strong growth in recent years. In FY 2023–24, bilateral trade was approximately US$8.947 billion. In FY 2024–25, this rose to about US$10.613 billion. These figures reflect rising commercial engagement across sectors such as energy, machinery, chemicals, and agricultural products.

• Strategic Energy Partnership: Oman plays an important role in India’s energy security. India imports crude oil and natural gas from Oman as part of its diversified energy sources. Oman’s position near the Strait of Hormuz, a key global oil transit point, gives India strategic access to energy supplies. This geographical advantage strengthens India’s energy resilience and reduces risk from supply disruptions. 

• Investment and Joint Ventures: Indian companies are active in the Oman free zones and in sectors such as manufacturing, logistics, energy, and infrastructure. There are over 6,000 India–Oman joint ventures, with Indian investment contributing over US$7.5 billion to the Omani economy over time. At the same time, Oman’s FDI equity inflow into India has crossed US$600 million, showing reciprocal investment confidence.

• Regional Trade and Connectivity: Oman is a gateway to the Middle East and Africa for India. The country’s ports and logistics facilities help link Indian markets with the Gulf region. Enhanced connectivity supports Indian exports and provides a route for broader integration into global value chains. Oman is India’s third-largest export destination among Gulf Cooperation Council (GCC) countries.

• Trade and Economic Sectors: India exports a wide array of goods to Oman, including machinery, textiles, food products, and industrial components. Oman exports energy products like crude oil, liquefied natural gas, and fertilisers to India. This diversified trade basket reduces dependency on a few sectors and makes the economic ties more balanced and sustainable over time.

• Strategic Regional Influence: Economic ties with Oman support India’s broader foreign policy goals in the Indo-Pacific. Oman often aligns with India on regional stability issues. The deepening economic engagement also complements defense cooperation, such as naval access and joint exercises, reinforcing India’s strategic footprint west of the Indian Ocean. 

What is a Free Trade Agreement (FTA)?

• A Free Trade Agreement (FTA) is a formal pact between two or more countries. It allows the partner countries to trade goods and services with each other at lower costs.
• In an FTA, member nations agree to reduce or eliminate customs duties and other trade barriers on products that move between them. 
• The primary purpose of a Free Trade Agreement is to expand trade and business opportunities among the signatory nations.
• Modern FTAs cover not just goods but also services and investment. Services include sectors like banking, tourism, IT, and transportation. 
• FTAs allow tariff preferences among signatories and still remain compatible with WTO norms under specific conditions.
• According to the WTO data, India has signed around 20 Free Trade Agreements (FTAs) and Preferential Trade Agreements (PTAs), including major India-UAE CEPA (Comprehensive Economic Partnership Agreement), India-Australia ECTA and India–UK Comprehensive Economic and Trade Agreement (CETA). 
• India signed a major FTA known as the India–EFTA Trade and Economic Partnership Agreement with Iceland, Liechtenstein, Norway, and Switzerland on 10 March 2024, which was entered into force on 1 October 2025. 
• India is actively engaged in negotiating Free Trade Agreements (FTAs) with several key international partners, including the United States, the European Union, Canada, and the Southern African Customs Union (SACU).