India-Oman trade agreement: Two countries sign CEPA to deepen economic engagement

The signing of a Comprehensive Economic Partnership Agreement (CEPA) between India and Oman marks a pivotal moment in the bilateral relationship, signaling a robust commitment to deepening economic engagement. This agreement, inked in Muscat during Prime Minister Narendra Modi's visit, is not merely a trade pact but a strategic move that underpins India's broader 'Act West' policy and its quest for enhanced economic presence and energy security in the crucial Middle East region.

**Background Context and Historical Ties:**

India and Oman share a historical relationship that dates back millennia, rooted in ancient maritime trade routes connecting the Indian subcontinent with the Arabian Peninsula and beyond. This long-standing connection fostered cultural exchanges and mutual understanding, laying a strong foundation for modern diplomatic and economic ties. In contemporary times, Oman has emerged as a key strategic partner for India in the Gulf region, largely due to its stable political environment, strategic location at the mouth of the Strait of Hormuz, and its role as a significant energy producer. India's 'Look West' policy, later rebranded as 'Act West,' emphasizes strengthening relations with countries in the Middle East and North Africa, recognizing their importance for India's energy security, trade, and the welfare of its large diaspora. Prior to the CEPA, bilateral trade between India and Oman stood at approximately $12 billion in FY 2022-23, with Indian exports to Oman primarily comprising mineral fuels, electrical machinery, iron and steel, and textiles, while imports were dominated by petroleum products, fertilizers, and chemicals. The CEPA aims to build on this existing trade by removing barriers and creating new avenues for cooperation.

**What Happened and Key Stakeholders:**

During a high-profile visit by Prime Minister Narendra Modi to Muscat, India and Oman officially signed the Comprehensive Economic Partnership Agreement. A CEPA is a broad-ranging free trade agreement that goes beyond mere tariff reductions. It typically covers trade in goods, services, investment, intellectual property rights, customs procedures, and other areas of economic cooperation. For this CEPA, specific details regarding tariff lines, rules of origin, and service sector commitments will dictate its immediate impact. The primary objective is to significantly boost bilateral trade and investment flows, aiming for substantial growth beyond current levels.

Key stakeholders involved in this agreement include:

* **Governments of India and Oman:** The primary architects and signatories, responsible for negotiation, implementation, and oversight of the pact. They aim to create a conducive policy environment for businesses.

* **Indian Businesses:** Exporters and importers across various sectors (e.g., agriculture, textiles, pharmaceuticals, automotive, IT, engineering) stand to benefit from reduced tariffs and easier market access in Oman. Investors will find new opportunities in Oman's diversifying economy.

* **Omani Businesses:** Similarly, Omani companies will gain enhanced access to the vast Indian market, particularly in sectors like petrochemicals, fertilizers, and traditional Omani products. They will also seek Indian investment and expertise.

* **Indian Diaspora in Oman:** A significant Indian expatriate community (over 620,000) resides in Oman. The CEPA, by fostering economic growth, will create more opportunities and improve the economic environment for this community, potentially facilitating remittances and family ties.

* **Regional Actors:** Other Gulf Cooperation Council (GCC) members and countries relying on the Strait of Hormuz will observe this pact closely, as it sets a precedent for regional economic integration and India's deepening ties with the Gulf.

**Significance for India and Future Implications:**

This CEPA holds immense significance for India on multiple fronts. Economically, it is expected to provide a substantial fillip to bilateral trade, potentially targeting a significant increase in trade volume within the next five years. Indian exports will benefit from preferential access to the Omani market, particularly in high-growth sectors. Conversely, Indian consumers and industries could benefit from easier access to Omani products, especially energy resources. The agreement will also facilitate Indian investment into Oman, particularly in infrastructure, manufacturing, and services, aligning with Oman's Vision 2040 for economic diversification. Crucially, it will also attract Omani investment into India, supporting initiatives like 'Make in India' and 'Atmanirbhar Bharat'.

Strategically, the CEPA reinforces India's 'Act West' policy, strengthening its diplomatic and economic footprint in a region vital for its energy security and geopolitical interests. Oman's strategic location near the Strait of Hormuz – a choke point for a significant portion of global oil trade – makes it a crucial partner for India's maritime security interests. Enhanced economic ties often translate into deeper strategic cooperation, including in defense and security. This pact also complements India's broader engagement with the GCC, potentially paving the way for a future India-GCC Free Trade Agreement.

Looking ahead, the CEPA is expected to unlock new opportunities in services trade, including IT, healthcare, education, and tourism. It could also lead to greater collaboration in emerging areas like renewable energy, green hydrogen, and digital transformation. The agreement will likely foster joint ventures, technology transfers, and greater people-to-people exchanges. The success of this CEPA could serve as a model for India's future economic engagements with other Gulf nations, further cementing India's position as a reliable economic and strategic partner in the region.

**Related Constitutional Articles, Acts, and Policies:**

From a constitutional perspective, international agreements like the CEPA fall under the purview of **Article 253 of the Indian Constitution**, which grants Parliament the power to make laws for implementing any treaty, agreement, or convention with any other country or any decision made at any international conference, association, or other body. This constitutional provision enables the Indian government to give legal effect to the commitments made under the CEPA. The **Foreign Trade (Development and Regulation) Act, 1992**, and the **Foreign Trade Policy (FTP)**, updated periodically by the Ministry of Commerce and Industry, provide the statutory framework and policy guidelines for India's international trade, including the implementation of such agreements. The CEPA aligns with India's broader economic diplomacy, which seeks to leverage trade and investment for national growth and strategic positioning.