India, Oman to sign free trade agreement tomorrow in Muscat

The impending signing of the Comprehensive Economic Partnership Agreement (CEPA), effectively a Free Trade Agreement (FTA), between India and Oman in Muscat marks a significant milestone in India's economic diplomacy and its strategic engagement with the Gulf Cooperation Council (GCC) region. This agreement is not merely about trade; it encapsulates a deeper strategic partnership built on historical ties and shared interests.

**Background Context and Historical Ties:**

India and Oman share a rich history of civilizational and trade linkages dating back millennia. Ancient maritime trade routes connected the western coast of India with the Omani ports, fostering cultural exchange and economic interdependence. In modern times, these ties have been meticulously nurtured, evolving into a robust strategic partnership. Oman has consistently been a vital partner for India in the Gulf, owing to its strategic location at the mouth of the Strait of Hormuz, a crucial choke point for global oil trade. Diplomatic relations were established in 1955, and since then, high-level visits and numerous agreements have laid the groundwork for enhanced cooperation. India's 'Look West' policy, later rebranded as 'Act West', underscores the importance of the Gulf region, and Oman, in particular, due to its stable political environment and willingness to engage deeply with India.

**What Happened: The India-Oman CEPA:**

The Comprehensive Economic Partnership Agreement (CEPA) aims to substantially boost bilateral economic ties by reducing or eliminating customs duties on a wide range of goods and streamlining trade in services. While the exact details of the duty reductions will be revealed upon signing, such agreements typically cover goods, services, investment, intellectual property rights, and dispute resolution mechanisms. For India, this means greater market access for its manufactured goods, agricultural products, and services sectors like IT, healthcare, and education. For Oman, it offers access to India's vast consumer market and opportunities for investment. Prime Minister Narendra Modi's presence at the signing underscores the high political importance India attaches to this agreement.

**Key Stakeholders Involved:**

The primary stakeholders are the governments of India and Oman, represented by their respective ministries of commerce and foreign affairs, and the Prime Minister of India. Beyond the governmental sphere, businesses and industries in both countries stand to gain immensely. Indian exporters, particularly in sectors like petroleum products, engineering goods, chemicals, textiles, and food products, will benefit from reduced tariffs. Similarly, Omani businesses in sectors such as oil and gas, minerals, and fisheries will find easier access to the Indian market. Consumers in both nations could also benefit from a wider variety of goods at potentially lower prices. The Indian diaspora in Oman, which is substantial, also forms an important human connection facilitating these economic ties.

**Significance for India:**

This CEPA holds multi-faceted significance for India. Economically, it is expected to significantly increase bilateral trade, which stood at approximately US$12.38 billion in FY 2022-23. Oman is already India's third-largest export destination in the GCC region, and the CEPA will further solidify this position. It supports India's 'Make in India' initiative by providing new export markets and attracting foreign investment. Strategically, Oman's geographic location is paramount. It provides India with a crucial gateway to the Middle East and East Africa. The Port of Duqm in Oman, where India has significant access rights, is a cornerstone of India's maritime security strategy, offering logistical support for the Indian Navy and enhancing India's presence in the Western Indian Ocean. This partnership contributes to India's energy security, as Oman is a reliable source of crude oil and LNG. Politically, strengthening ties with Oman enhances India's influence in the GCC, an economically vital and geopolitically sensitive region, aligning with India's broader foreign policy objectives of fostering stable and prosperous partnerships.

**Constitutional Articles and Policies:**

The power to enter into and implement international agreements like the CEPA is derived from the Indian Constitution. **Article 253** empowers the Parliament to make any law for implementing any treaty, agreement, or convention with any other country or any decision made at any international conference, association, or other body. Furthermore, subjects like 'Foreign Affairs' (Entry 14) and 'Trade and commerce with foreign countries' (Entry 41) fall under the Union List of the **Seventh Schedule** of the Constitution, granting the central government exclusive legislative competence. The implementation of tariff reductions will be governed by the **Customs Act, 1962**. This CEPA is also a practical manifestation of India's 'Act West' policy, complementing initiatives like the 'Make in India' and 'Atmanirbhar Bharat' campaigns by seeking global market access for Indian products and services.

**Future Implications:**

The India-Oman CEPA is poised to usher in an era of enhanced economic prosperity and strategic cooperation. It could serve as a template for India's engagement with other GCC nations, especially as India diversifies its trade partners amidst global economic shifts. Increased investment flows from Oman into India, particularly in infrastructure, energy, and technology sectors, are anticipated. The agreement will deepen people-to-people contacts and foster greater collaboration in areas beyond trade, such as defence, culture, and education. This robust partnership will contribute to regional stability and India's growing stature as a responsible global power, reinforcing its role in the Indian Ocean Region and beyond.