India and Oman Sign Comprehensive Economic Partnership Agreement (CEPA)

India-Oman Comprehensive Economic Partnership Agreement (CEPA)

India-Oman Comprehensive Economic Partnership Agreement (CEPA) is a proposed strategic trade agreement that is intended to strengthen economic ties between Oman and India. Both nations have an age-old relationship based on trade, energy, and diaspora linkages. With the CEPA, the intention is to establish an apparatus that stimulates bilateral trade, increases investments, and enhances cooperation in various sectors. Formal discussions over the CEPA commenced in November 2023, with efforts from both nations to quickly resolve it within 2024. The accord takes on much meaning as India tries to firm its relationship with countries of the Gulf Cooperation Council (GCC) now that India-UAE CEPA has found success.

Oman is strategically important for India because of its location, which gives India direct access to major shipping channels and serves as a gateway to Middle Eastern, African, and European markets. Oman is also an important trade partner for India in the GCC region from an economic perspective, and the CEPA seeks to elevate this partnership to the next level.

The accord aims to abolish or lower tariffs on a number of products, simplify regulatory procedures, and foster a freer flow of services and investments. It also looks to establish a stable and clear framework for investors and businesses on both sides to facilitate long-term economic cooperation.

Current Trade Snapshot

India-Oman bilateral trade was around USD 12.39 billion in 2022-23. India exports various products to Oman, such as engineering goods, machinery, pharmaceuticals, textiles, food items, and chemicals. India imports petroleum products, fertilizers, minerals, and other chemical products from Oman. Besides trade, there are more than 4,000 India-Oman joint ventures, especially in the areas of oil refining, power, steel, mining, and hospitality. Oman has also made investments in various infrastructure projects in India, especially in logistics and energy.

Key Focus Areas of the CEPA

The CEPA will focus on enhancing cooperation in various key areas:

     i.        Goods Trade

The pact will try to eliminate or lower customs duty on most items, which would make Indian products competitive in Oman and vice versa. This would especially help industries such as textiles, automobiles, pharmaceuticals, and food products.

    ii.        Services Trade

Oman is a growing market for Indian services expertise, particularly in services such as information technology, healthcare, education, finance, and professional services. The CEPA seeks to open up market access for services providers to facilitate easier business for Indian professionals and firms in Oman.

  iii.        Investment Promotion

The CEPA will establish a more stable framework for investors in the form of better legal protection, more transparent rules, and ways to resolve differences. This will invite investors from both sides to invest in other countries' markets, particularly infrastructure, green energy, tourism, and industry.

 iv.        Customs and Trade Facilitation

Simplifying customs procedures, improved cooperation among authorities, and advancing digital documentation are key objectives of the CEPA. This will minimize the time and expense required for cross-border trade.

 v.        Intellectual Property Cooperation

The CEPA is supposed to advance cooperation in the protection of intellectual property rights, such as patents, trademarks, and copyrights, ensuring that innovation and creative industries are protected.

 vi.        E-commerce and Digital Trade

Addressing the increasing significance of digital trade, the CEPA can foresee provisions to facilitate secure and effective online transactions, cross-border data flows, and consumer protection in digital trade.

 vii.        Government Procurement

Another cooperation domain can be facilitating access to public sector projects for businesses of both nations, opening up new opportunities in infrastructure, defense, and public services.

Strategic Benefits

The India-Oman CEPA has the potential to:

      i.        Make exports and imports more economical to increase bilateral trade.

    ii.        Establish new markets for Oman-based businesses from India and elsewhere, leveraging Oman as a hub to enter Africa and Europe.

   iii.        Increase employment opportunities in logistics, manufacturing, IT, and healthcare.

   iv.        Foster energy security through long-term partnership on oil and gas supplies.

    v.        Enhance India's footprint in the Gulf, in addition to strategic and defense ties.

Challenges to Address

While significant benefits are anticipated from the CEPA, there are also challenges that both parties must navigate. These include regulatory standards alignment, resolution of non-tariff barriers, and guaranteeing sensitive industries are shielded from abrupt import surges. Regional geopolitical concerns and logistical challenges could also affect the seamless implementation of the agreement.

Latest Developments

As of January 2024, India and Oman have finalized several rounds of talks. The discussions have received a boost through high-level exchanges, including a visit by India's Commerce and Industry Minister Piyush Goyal to Oman in January 2024. Both countries are hopeful of signing the agreement by the end of the year.

Concurrently, India and Oman have also amended their Double Taxation Avoidance Agreement (DTAA) to be in line with international best practices, which will complement the CEPA by minimizing tax complexities for enterprises involved in cross-border trade and investment.

Conclusion

The India-Oman CEPA is a natural evolution of the long-standing relationship between the two nations. When signed, the agreement is set to greatly enhance trade, unlock new opportunities for business and workers, and consolidate India's strategic outreach towards the Gulf region. It is a major move in India's overall economic diplomacy, with the objective of creating robust supply chains, securing energy relationships, and deepening its international trade presence.