A trade agreement between India and Oman providing zero-duty access for labor-intensive exports has officially come into effect this month [1].
The pact is designed to safeguard Indian commerce against volatility in West Asia. By establishing alternative trade corridors, the agreement seeks to reduce reliance on the Strait of Hormuz, a critical maritime chokepoint currently disrupted by the U.S.-Iran war [2].
Known as the Comprehensive Economic Partnership Agreement, or CEPA, the deal was signed in December 2023 [3]. The signing occurred during a visit to Muscat by Prime Minister Narendra Modi [3]. Under the terms of the agreement, various Indian labor-intensive exports will now enter the Omani market with zero duty [1].
Logistical security is a primary driver for the partnership. Shipping through the Strait of Hormuz has become increasingly unstable due to the ongoing conflict between the U.S. and Iran [2]. The two nations intend for this pact to open alternative Gulf routes to ensure the flow of goods remains uninterrupted [2].
This strategic alignment allows India to diversify its market access within the Gulf region. By securing preferential tariffs and new routing options, India aims to cushion the economic impact of regional instability, while boosting its export volume to Oman [1], [2].
“The pact is intended to mitigate disruptions in the Strait of Hormuz and open alternative Gulf routes.”
This agreement represents a strategic shift in India's trade diplomacy, moving from simple bilateral trade to a security-focused economic partnership. By creating a legal and logistical framework to bypass the Strait of Hormuz, India is attempting to insulate its supply chains from the geopolitical volatility of the U.S.-Iran conflict, effectively treating trade routes as a matter of national security.
