Introduction

India has signed a trade agreement with Oman to expand its export footprint in West Asia at a time when tariff barriers are increasing in the US and the European Union. The deal aligns with India’s accelerated push for Free Trade Agreements (FTAs) to secure alternative markets and reduce exposure to trade uncertainty. Oman’s location, tariff concessions, and services commitments give the agreement strategic weight beyond bilateral trade volumes.

Why in the News

India and Oman signed a trade agreement aimed at expanding Indian exports in West Asia amid rising tariff and carbon-related trade restrictions in Western markets. The deal is significant as it gives India preferential access to a strategically located Gulf economy, complements India’s FTA push. This adds Oman as the second Gulf Cooperation Council (GCC) partner after the UAE. 

India’s FTA Strategy in a Fragmenting Global Trade Order

1. Trade Diversification: Reduces dependence on US and EU markets amid tariff hikes and carbon border taxes.
2. FTA Acceleration: Strengthens India’s strategy of signing multiple FTAs to secure predictable market access.
3. GCC Engagement: Adds Oman as India’s second FTA partner in the GCC after the UAE.
4. Non-Tariff Barriers: Lowers compliance costs compared to EU standards, indirectly supporting MSME exporters.

Oman as a Strategic Trade Hub Rather Than a Large Market

1. Geographical Advantage: Facilitates access to West Asia and African markets through Omani ports.
2. Hub Function: Enables Indian goods to reach third markets despite Oman’s limited domestic demand.
3. Comparative Position: Less diversified and smaller than the UAE but strategically located.
4. Logistics Leverage: Supports India’s West Asia outreach through regional supply chains

Trade Trends and Composition of India-Oman Trade

1. Trade Growth: Total trade rose from $3.08 billion (2020-21) to $10.6 billion (2024-25).
2. Peak Trade: Highest total trade recorded at $12.38 billion in 2022-23.
3. Exports (2024-25):
   1. Mineral Fuel: $1,571.72 million
   2. Inorganic Chemicals: $379.91 million
   3. Machinery & Parts: $231.81 million
   4. Aircraft & Parts: $174.72 million
4. Imports (2024-25):
   1. Bituminous Substances: $2,940.06 million
   2. Fertilisers: $1,069.35 million
   3. Organic Chemicals: $608.74 million
   4. Rare Earth Metals: $407.75 million
5. Trade Balance: Shifted in India’s favour with a surplus of $2.48 billion in 2024-25.

Tariff Liberalisation and Industrial Export Gains

1. Zero-Duty Access: Covers 98% of Omani tariff lines for Indian goods.
2. Export Expansion: Machinery and parts exports have doubled over five years.
3. Product Basket: Includes machinery, aircraft, rice, iron and steel articles, ceramics, personal care products.
4. Competitiveness: Improves price competitiveness of Indian industrial exports in the Gulf.

Energy Linkages and Input Security

1. Oman’s Exports: Crude oil, LNG, fertilisers, chemical inputs, petroleum coke.
2. Energy Security: Supplies critical inputs for India’s fertiliser and energy sectors.
3. Tariff Advantage: Many items already enjoy low tariffs under India’s existing FTAs.
4. Supply Stability: Strengthens long-term energy and industrial input sourcing.

Services Trade and Mobility Gains for India

1. Services Imports by Oman: $12.52 billion globally.
2. India’s Share: 5.31% of Oman’s services imports.
3. Sectoral Commitments:
   1. Computer-related services
   2. Business and professional services
   3. Audio-visual services
   4. R&D
   5. Education and health services
4. Mode 4 Mobility:
   1. Intra-Corporate Transferees: Quota raised from 20% to 50%.
   2. Contractual Service Suppliers: Stay extended from 90 days to two years, extendable further.

Leveraging Oman’s FTA with the United States

1. US-Oman FTA (2009): Allows duty-free access for a wide range of Omani exports to the US.
2. Re-Export Potential: Positions Oman as a gateway for Indian firms targeting the US market.
3. Affected Sectors: Industrial supplies, aluminium, fertilisers, jewellery, plastics.
4. Strategic Synergy: Offsets trade stress faced by Indian exporters in the US.

Conclusion

The India-Oman trade agreement reflects a quiet but consequential recalibration of India’s engagement with West Asia. At a time when traditional markets are becoming more restrictive and global trade rules are increasingly fragmented, the partnership with Oman offers India both economic breathing space and strategic flexibility. Beyond trade numbers, the agreement strengthens supply chain resilience, opens pathways for Indian professionals, and leverages Oman’s geography as a gateway to wider regional and global markets. In doing so, it underscores a broader shift in India’s foreign policy, one that blends economic pragmatism with strategic foresight, using trade not merely as a commercial tool but as an instrument of long-term regional engagement.

PYQ Relevance

[UPSC 2017] The question of India’s Energy Security constitutes the most important part of India’s economic progress. Analyze India’s energy policy cooperation with West Asian countries.

Linkage: The India-Oman trade deal deepens energy-linked trade (crude oil, LNG, fertilisers, chemical inputs) while institutionalising trade and services cooperation, directly advancing India’s West Asia energy security framework.

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