Indian Goods Worth $3.7 Billion Entering Oman To Get Boost By Free Trade Agreement: GTRI Report

Over 83.5 per cent of Indian goods worth USD 3.7 billion such as gasoline, iron and steel, electronics, and machinery will get a significant boost in Oman, once both sides reach a comprehensive free trade agreement, a report said on Tuesday. According to the - India-OMAN CEPA: Gateway to Middle Eastern Markets and Beyond - report, prepared by think tank Global trade Reproach Initiative (GTRI), these goods at present face a 5 per cent import duty in Oman.

India and Oman are negotiating a comprehensive economic partnership agreement (CEPA), under which the two countries could significantly reduce or eliminate customs duties on the maximum number of goods agreed between them. With the new trade agreement, these products, including major export items like motor gasoline (exports worth USD 1.7 billion), iron and steel products (exports worth USD 235 million), electronics (USD 135 million), machinery (USD 125 million), aluminium oxide (USD 126 million), textiles (USD 110 million), alumina calcined (USD 105 million), plastics (USD 64 million), boneless meat (USD 50 million), essential oils (USD 47 million), and motor cars (USD 28 million), will benefit from duty elimination, it said.

However, it added that about 16.5 per cent of Indian exports to Oman, worth USD 800 million and goods that already have duty-free access, will not see additional benefits from the agreement. These items include wheat (USD 45 million), basmati rice (USD 125 million), fruits, vegetables (USD 76 million), medicines (USD 76 million), fish (USD 13.7 million), tea, coffee (USD 17.7 million).

"The duty elimination will aid most Indian exports, but significant growth in the Omani market, a small, middle-income economy with a USD 25,000 per capita income, will also depend on product quality improvements," GTRI Co-Founder Ajay Srivastava said. He said that India can hope to radically increase its exports post the free trade agreement, as currently over 80 per cent of its goods enter Oman at average 5 per cent import duties, and there are not many trade barriers.

Oman's import duty ranges from 0 to 100 per cent along with the existence of specific duties. 100 per cent duty is applicable on specific meats, wines and tobacco products. India's merchandise imports from Oman were USD 7.9 billion in 2022-23. Key imports are petroleum products (USD 4.6 billion) and urea (USD 1.2 billion). These account for 73 per cent of imports. Other key products are propylene and ethylene polymers (USD 383 million), pet coke (USD $265 million), gypsum (USD 115 million), chemicals (USD 417 million), iron and steel (USD 62 million), and unwrought aluminium (USD 95 million).

"These products will gain from FTA-led tariff elimination by India. Most are raw materials and input to industries and India has opened most such imports from other FTA partner countries," the report said. On the services side, it said, in 2022, India's service exports to Oman were worth about USD 2.8 billion, while its imports were USD 0.2 billion. "India could seek increased access to the Omani market for business services and computer and information services, which Oman regularly imports. India might also negotiate for priority visas for its professionals on short-term assignments in Oman.

Oman has a weak services sector and may not press for much opening of Indian markets," Srivastava said. To provide greater market access for its pharma products, India may request Oman for track approval for Indian pharma products that are already registered with the US Food and Drug Administration (USFDA), UK drug regulator MHRA and European Medicines Agency, it said. India's free trade agreement with the UAE has a similar proposal. India has implemented a trade agreement with the UAE in May. Both Oman and UAE are members of the Gulf Cooperation Council (GCC).

India's GDP of about USD 3.5 trillion is significantly larger than Oman's GDP of USD 115 billion. This indicates that India's economy is far more extensive and diverse. With a population of 1.4 billion compared to Oman's 5 million, India represents a vast consumer market for Oman.

"However, Oman's higher per capita income (USD 25,060) compared to India's (USD 2,370) could mean a demand for more diversified and possibly higher-value goods and services in Oman, which India could aim to supply," Srivastava said, adding Oman might use this FTA to diversify its economy, reducing dependence on oil and gas sectors, and to develop its human resources by gaining access to India's educational and technological expertise.

He added that the reduction in import duties under the CEPA will allow Indian products to enter the Omani market at competitive prices. India' diverse range of products, from pharmaceuticals and textiles to technology and agriculture, will gain a significant advantage, enhancing India's export potential.

Similarly, Oman's products, particularly in sectors like oil and gas, petrochemicals, and certain types of manufactured goods, will find a more receptive market in India. Reduced import duties mean these products can be offered at more competitive prices, potentially increasing Omani exports. "Beyond the immediate economic benefits, the CEPA holds considerable strategic importance for India.

It serves as a gateway for India to strengthen its footprint in Middle Eastern economies. This partnership with Oman can act as a catalyst, enhancing India's geopolitical presence and fostering deeper ties with other Middle Eastern countries," he added.

(PTI)