Why the India-Oman CEPA is Special

The India-Oman Comprehensive Economic Partnership Agreement (CEPA), which was signed on December 18, 2025, during Indian Prime Minister Narendra Modi’s visit to Muscat, came into effect on June 1.

India has similar agreements with several other countries, including in the Gulf region, such as the United Arab Emirates (UAE), for example. The CEPA with Oman, however, is particularly valuable to India. Recent developments underscore its importance.

The India-Oman CEPA has kicked into effect at a critical time for the Indian economy. India imports over 88 percent and 50 percent of its crude oil and gas needs, respectively. Gulf countries are an important source in this regard; India relies heavily on the region for crude oil, LNG, and fertilizers, with two-thirds of this supply coming from Qatar, the UAE and ​Oman.

India’s trade with the Gulf has been heavily impacted by the Strait of Hormuz crisis since March this year. Imports from the Gulf dropped from around $15 billion in April 2025 to $9.8 billion in April 2026. Likewise, Indian exports to the region declined from $4.4 billion to $2.7 billion in this period.

Amid this upheaval in India’s trade with the Gulf region, Oman emerged as a lifesaver. The numbers speak for themselves. Trade with Oman has boomed. Imports from Oman grew from $430 million in April 2025 to nearly $1.5 billion in April 2026 — a whopping 246.4 percent — driven by India’s stepped-up purchase of crude oil and urea in the wake of the shortages due to the trade disruption following the Hormuz crisis. Trade with other Gulf countries dropped sharply in this period.

Oman’s location makes it a highly valuable partner for India.

Located along the southeastern coast of the Arabian Peninsula, Oman lies at the intersection of the Arabian Sea, the Sea of Oman, and the Arabian Gulf. Importantly, Oman’s Musandam peninsula, located at the north of the country, reaches into the strategic Strait of Hormuz. Oman thus shares the entrance to the Hormuz Strait with Iran on the other side.

Oman’s value as a trade partner amid the Strait of Hormuz crisis was boosted by another feature of its geographic location.

Unlike other Gulf countries, much of Oman’s coastline lies outside the Strait of Hormuz. As Ajay Srivastava, founder of the Global Trade Research Initiative, pointed out, since Oman’s major ports — the Port of Salalah and Port of Duqm — lie outside the Strait of Hormuz, they “remain accessible even when traffic through the Strait is disrupted. As a result, Oman can continue serving as a reliable trade and energy gateway during periods of conflict or instability in the Gulf.”

This is why India’s trade with Oman surged as attacks and closures of the Strait of Hormuz drove down India’s trade with other Gulf countries.

“[This] experience shows that Oman can act as a dependable alternative trade and energy gateway for India when the Strait of Hormuz becomes risky or congested,” Srivastava said.

With vessels plying the Strait of Hormuz being attacked and trade via this waterway roiled in uncertainty, countries are realizing the value of Oman’s coastline outside Hormuz. With its CEPA with Oman now kicking into effect as of June 1, India is well-positioned to maximize benefits.

The India-Oman CEPA grants India 100 percent duty-free access across 98.08 percent of tariff lines, covering 99.38 percent of export value. Pre-CEPA, only 15 percent of Indian goods entered Oman duty-free. CEPA opens export opportunities for India across engineering goods, pharmaceuticals, agriculture and processed food, marine products, textiles, chemicals, electronics, plastics, and gems and jewelry. Several of these commodities are produced in labor-intensive and value-added sectors, and involve micro, small and medium enterprises (MSMEs).

The agreement is expected to boost bilateral trade, generate employment, strengthen supply chains, and support deeper and more sustained economic engagement between India and Oman.

India and Oman have enjoyed close trade, cultural and people-to-people relations for millennia. Independent India established diplomatic relations with Oman in 1955. Indian analysts recall that “decades ago, when the [Gulf] region was still ambivalent towards India and soft and supportive of Pakistan, it was Oman which kept its doors open to India.” Ties have strengthened over the decades, fueled largely by India’s oil imports from Oman but also by growing defense cooperation in recent decades. In November 2008, India and Oman became strategic partners. Defense cooperation, especially between their navies, has grown significantly.

CEPA will take the bilateral relationship further. The agreement will increase the competitiveness of Indian goods in the Omani market. Indian traders will be looking to cash in on this advantage. However, they would do well to temper their expectations. Oman has a small population of just about 5.68 million people. Its market size is small, which means that the amount of Indian goods that can be absorbed by the Omani market is limited.

This is where yet another aspect of Oman’s geography could come to the rescue of Indian traders. The country shares land borders with Saudi Arabia to the west, the UAE to the northwest and Yemen to the southwest. Cargo offloaded from Indian ships at the Omani ports of Salalah and Duqm, could be trucked across to Saudi Arabia, Yemen, the UAE and beyond, bypassing the Strait of Hormuz.