India’s Next Trade Win: What the Oman FTA Means for Jobs, Exports, & Energy

Introduction

India and Oman are close to finalizing a landmark Free Trade Agreement (FTA) that could recalibrate economic ties between South Asia and the Gulf. Talks, which began in earnest in May 2023, are now down to resolving one final issue: Oman’s policy of “Omanisation,” which aims to prioritize local employment.

From the perspective of trade, foreign direct investment (FDI), and strategic depth, this FTA has wide-ranging implications for both bilateral ties and India’s ambitions in the Gulf and the broader Indian Ocean region.

A Quick Look: India-Oman Economic Ties

India and Oman have long shared economic and strategic interests. Bilateral trade stood at $12.39 billion in FY23, with India exporting $4.48 billion of goods to Oman and importing $7.91 billion, primarily oil and gas (Source: Ministry of Commerce, India). Oman is India’s third-largest trading partner in the Gulf after the UAE and Saudi Arabia.

What Is the India-Oman FTA?

A Free Trade Agreement (FTA) between India and Oman would eliminate or reduce tariffs on various goods and services. Talks are being held under the Comprehensive Economic Partnership Agreement (CEPA) framework, similar to India’s agreements with the UAE and Australia.

According to government sources cited in CNBC-TV18 and The Economic Times, negotiations have been largely successful, with the apparel, pharmaceuticals, engineering goods, and chemicals sectors expected to benefit significantly.

The ‘Omanisation’ Roadblock

Despite strong progress, one issue remains contentious: Oman’s “Omanisation” policy, which mandates companies operating in Oman to reserve a particular share of jobs for Omani nationals. India, with its large expatriate workforce in the Gulf (approximately 6.5 million Indians work in the region, as per MEA data), is seeking greater flexibility in labor mobility and employment quotas for Indians.

As per Financial Express, India is pushing to allow a wider job window for Indian workers, particularly in sectors like construction, healthcare, and hospitality.

Economic Gains: What’s at Stake?

1. Boost to Indian Exports

India’s apparel exports to Oman could rise sharply. A report from Fibre2Fashion suggests the FTA could tilt apparel trade in India’s favour, as reduced tariffs would help Indian textile manufacturers compete with China and Turkey, which currently dominate the Omani market. 

Statista said India’s textile exports stood at $44.4 billion in FY23. A successful FTA with Oman could open access to Oman’s $80 billion economy and its trade partners across the Gulf. 

2. Investment and Infrastructure

Oman’s investment in Indian strategic infrastructure has been rising. The Duqm Port, where India has access under a bilateral MoU, is a key example. An FTA will likely facilitate more Gulf capital into Indian infrastructure and manufacturing sectors, aligning with India’s Make-in-India and PLI initiatives.

3. Energy Security

India imports significant quantities of oil and LNG from Oman. A preferential trade framework could reduce energy costs, a major boon given India’s dependency on Gulf oil. Lower tariffs on LNG and petrochemical products will benefit Indian refiners and downstream users.

Challenges Ahead

1. Omanisation and Labour Rights

India’s concern about Oman’s workforce policy is valid. Oman wants to safeguard local employment amid rising unemployment rates among its youth, which stood at approximately 18% in 2023 (World Bank). India will have to negotiate exceptions or phased implementation for sectors heavily reliant on Indian workers.

2. Trade Balance Risks

While Indian exports may rise, the trade deficit could persist unless India’s non-oil exports grow faster. India must ensure that tariff lines for high-value sectors like electronics and precision instruments are favorably negotiated.

3. Gulf Competition

India already has a CEPA with the UAE and is negotiating similar deals with Saudi Arabia and the Gulf Cooperation Council (GCC). Any delay in the Oman deal could see India lose market share in Oman to regional rivals.

Strategic Significance

This agreement isn’t just about economics. Oman holds a strategic location at the mouth of the Persian Gulf, near the Strait of Hormuz, through which over 20% of global oil trade passes. A deeper trade and investment pact enhances India’s maritime and regional security posture.

Moreover, as Oman modernizes its economy under Vision 2040, the FTA aligns well with both countries’ future growth ambitions.

The Way Forward

With just the Omanisation policy remaining as the final sticking point, both sides are expected to arrive at a mutually beneficial labor mobility clause—possibly a quota-based system or sector-specific carve-outs for Indian workers.

India must also ensure that non-tariff barriers (NTBs), standards, and certification systems are harmonized to ease the flow of goods.

A successful FTA will enhance India’s standing in the Gulf, support domestic manufacturing, and strengthen geopolitical alliances in the Indo-Pacific region.

The India-Oman Free Trade Agreement is more than a bilateral deal, its a strategic and economic milestone. With the Gulf increasingly becoming a pivot in India’s foreign policy, this FTA could help consolidate India’s regional influence while driving trade, jobs, and energy cooperation. The final step is delicate, but the gains on the other side make it worth the effort.

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