The signing of the India-Oman Comprehensive Economic Partnership Agreement (CEPA) on December 18, 2025, marks a watershed moment in India’s "Act West" policy. As the first major trade deal signed since the global supply chain realignments of the mid-2020s, it serves as a blueprint for India's deepened engagement with the Global South and the GCC (Gulf Cooperation Council).
Detailed Analytical Article: India-Oman CEPA
1. The Strategic Context
The India-Oman CEPA is not merely a trade document; it is a geoeconomic maneuver. Historically, Oman has been India’s oldest strategic partner in the Gulf. This agreement bridges the gap between traditional energy-based ties and a modern, diversified economic partnership.
* Gateway to West Asia: Oman occupies a pivotal location overlooking the Arabian Sea and the Persian Gulf.
* Countering Regional Influence: Amidst China's growing footprint in the Middle East, the CEPA solidifies India's role as a primary security and economic provider in the Indian Ocean Region (IOR).
2. Deep Dive into Key Provisions
The agreement covers trade in goods, services, and investment, characterized by a high level of ambition:
* Tariff Liberalization: By removing duties on over 98% of Indian exports, India gains a competitive edge against other exporters. This is particularly crucial for labor-intensive sectors like textiles and footwear.
* Service Mobility (Mode 4): A standout feature is the ease of movement for Indian professionals. This addresses a long-standing demand of the Indian IT and healthcare sectors, allowing for better integration of the Indian talent pool into the Omani economy.
* Stringent Rules of Origin (RoO): To prevent the "circumvention" of duties (where goods from third-party countries are routed through Oman), a 40% value-addition requirement ensures that the benefits of the CEPA accrue only to genuine Omani and Indian manufacturers.
3. Economic and Geopolitical Implications
* Diversification of Energy Basket: While oil remains central, the CEPA facilitates Indian investment in Oman’s Green Hydrogen and renewable energy projects, aligning with India's Net Zero targets.
* The IMEC Linkage: The agreement strengthens the logistics of the India-Middle East-Europe Economic Corridor (IMEC), with Omani ports like Duqm serving as critical hubs for Indian cargo.
* SME and MSME Growth: By removing non-tariff barriers, the agreement opens doors for smaller Indian enterprises to enter the Gulf market without prohibitive compliance costs.
4. Critical Assessment: Challenges Ahead
While the CEPA is a landmark, several hurdles remain:
* Competition with UAE: Since India already has a CEPA with the UAE, Omani exporters must compete with their neighbors for a share of the Indian market.
* Non-Tariff Barriers (NTBs): Technical standards and sanitary regulations in Oman can sometimes be more restrictive than the tariffs themselves.
* Regional Instability: Geopolitical tensions in the Red Sea and the Strait of Hormuz could physically impede the trade routes the CEPA seeks to optimize.
UPSC Prelims Practice Questions
Q1. Consider the following statements regarding the India-Oman CEPA (2025):
* It is the first Free Trade Agreement Oman has signed in over two decades.
* The agreement mandates a minimum of 40% local value addition for goods to qualify for preferential tariffs.
* Under the agreement, India has provided immediate zero-duty access to 100% of Omani imports.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2, and 3
Answer: (a)
Explanation: Statement 3 is incorrect. While liberalization is high (approx. 97.96%), it is not 100% due to sensitive lists maintained by India to protect domestic agriculture and MSMEs.
Q2. The term "Mode 4" often seen in the context of CEPA negotiations refers to:
(a) The cross-border supply of digital services.
(b) The movement of natural persons for providing services.
(c) The consumption of services abroad (e.g., medical tourism).
(d) Commercial presence through FDI in a foreign country.
Answer: (b)
UPSC Mains Practice Questions
Q1. (GS-2: International Relations)
"The India-Oman CEPA is more than a trade agreement; it is a strategic anchor for India in the Western Indian Ocean." Evaluate the statement in light of India’s maritime security and economic interests. (250 Words)
Q2. (GS-3: Economy)
How does the India-Oman CEPA align with India’s goal of reaching a $2 trillion export target by 2030? Discuss the potential risks to India's domestic manufacturing sector arising from such bilateral trade liberalizations. (250 Words)
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