India-Oman CEPA to boost trade, MSME exports, energy security: Bank of Baroda economist

India's signing of the Comprehensive Economic Partnership Agreement (CEPA) with Oman marks a significant milestone in its foreign trade strategy and deepens its engagement with the strategically vital Gulf region. This pact is more than just a trade deal; it's a testament to strengthening bilateral relations, diversifying economic partnerships, and securing India's long-term interests in energy and trade.

**Background Context and Historical Ties:**

India and Oman share a rich history of maritime trade and cultural exchanges dating back millennia. Oman, situated at the mouth of the Strait of Hormuz, has always been a crucial gateway for India's trade with the Middle East, Africa, and Europe. In modern times, this relationship has evolved into a strategic partnership, encompassing defence, energy, and economic cooperation. India's 'Look West' policy, complementing its 'Act East' policy, emphasizes strengthening ties with the Gulf Cooperation Council (GCC) countries, of which Oman is a key member. This CEPA comes in the wake of similar successful agreements with the UAE and Australia, signaling India's proactive approach to forging beneficial trade alliances amidst evolving global trade dynamics and supply chain realignments.

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

The CEPA, signed during Prime Minister Narendra Modi’s visit to Oman, is designed to significantly boost bilateral trade, support MSME-led exports, and strengthen energy security. The core of the agreement lies in offering zero-duty access on over 98% of Oman's tariff lines for Indian goods. This means a vast majority of Indian products will enter the Omani market without customs duties, making them more competitive. Crucially, the pact targets labour-intensive sectors like textiles, gems and jewellery, engineering goods, and pharmaceuticals, which are vital for India's employment generation and export growth. Beyond goods, such agreements often include provisions for trade in services, investment, intellectual property rights, and dispute resolution, creating a comprehensive framework for economic engagement.

**Key Stakeholders Involved:**

On the Indian side, key stakeholders include the **Government of India** (specifically the Ministry of Commerce & Industry and the Ministry of External Affairs) which negotiated and signed the agreement. **Indian businesses**, particularly exporters and importers, stand to gain from reduced tariffs and improved market access. **Micro, Small, and Medium Enterprises (MSMEs)** are significant beneficiaries, as the zero-duty access provides them a crucial competitive edge in a new market, aligning with the 'Make in India' and 'Aatmanirbhar Bharat' initiatives. On the Omani side, the **Government of Oman** is a primary stakeholder, aiming to diversify its economy away from oil, attract foreign investment, and secure essential goods and services from India. **Omani businesses and consumers** will benefit from a wider range of competitively priced Indian products and services.

**Significance for India:**

This CEPA holds multi-faceted significance for India. **Economically**, it is projected to substantially increase bilateral trade, which stood at around $12.39 billion in FY23. Enhanced market access will boost India's exports, helping achieve ambitious export targets. For **MSMEs**, it opens new avenues for growth, potentially creating jobs and fostering economic development. In terms of **energy security**, Oman is a reliable partner for India's energy needs, and a strengthened economic relationship can ensure stable supply lines for crude oil and LNG, crucial for India's growing economy. **Geopolitically**, Oman's strategic location at the crossroads of major shipping lanes makes it a vital partner. Deepening ties with Oman enhances India's influence and presence in the broader Middle East, reinforcing its 'Look West' policy and contributing to regional stability. This agreement also serves as a template and builds momentum for potential future free trade agreements with other GCC countries.

**Constitutional and Policy Linkages:**

The power to enter into international treaties and agreements primarily rests with the **Union Executive** under the Indian Constitution. While not explicitly mentioned in a single article, Article 73 broadly defines the executive power of the Union, extending to matters with respect to which Parliament has power to make laws. For the implementation of such treaties within India, **Article 253** empowers 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. This CEPA is also a direct instrument of India's **Foreign Trade Policy**, which aims to promote exports, diversify markets, and integrate India into global value chains. It aligns with broader economic policies like 'Make in India' (by boosting manufacturing for export), 'Aatmanirbhar Bharat' (by fostering self-reliance through global engagement), and various MSME development schemes.

**Future Implications:**

Looking ahead, the India-Oman CEPA is expected to foster greater **bilateral investment flows**, as businesses from both sides explore opportunities in each other's markets. It could lead to enhanced cooperation in emerging sectors such as renewable energy, digital economy, and logistics. The agreement solidifies India's position as a reliable economic partner in the Gulf region and could pave the way for a more comprehensive Free Trade Agreement with the entire GCC bloc. It underscores India's commitment to a rules-based international trading system and its strategy to build resilient supply chains through diversified partnerships, ultimately contributing to India's aspiration of becoming a $5 trillion economy.