India en route to boost Gulf trade amid tensions with Pakistan

India is deepening its economic ties with the Gulf, finalising trade deals, in the backdrop of enduring tensions with Pakistan. Most of the Gulf nations had taken a neutral stance during the conflict between two sides while urging restraint and de-escalation.

India may soon ink a free trade agreement with Oman, its oldest strategic partner in the region. Talks for the IndiaOman FTA are almost complete, and an announcement is expected this month, said people in know of the development. New Delhi is “seriously considering” similar pacts with other Gulf countries such as Qatar, the people said. Qatar — whose Emir visited New Delhi this February and is looking to make major investments in India — stayed neutral during the India-Pakistan conflict.

India already has a trade deal with the UAE. It is also negotiating an FTA with the Gulf Cooperation Council (GCC) to further enhance cooperation in trade, energy, investment, and security with the region. The GCC comprises Saudi Arabia, the UAE, Qatar, Kuwait, Oman and Bahrain. Talks for the IndiaOman Comprehensive Economic Partnership Agreement (CEPA), formally began in November 2023.

“Only a few issues are left to be resolved with Oman and an announcement could be made this month,” said one of the persons cited above.

India’s goods exports to Oman reached $4.42 billion during the April-February period of FY25, while imports were at $4.52 billion. India’s key imports are petroleum products and urea — together accounting for more than 70% of the import bill.

Propylene and ethylene polymers, pet coke, gypsum, chemicals, and iron and steel are the other key imports from the Gulf nation. Its main export items to Oman are light oils and preparations; ships, boats and floating structures; aluminium oxide other than artificial corundum; rice; boilers, machinery and mechanical appliances, parts thereof; aeroplanes and other aircraft; sunglasses; meat and edible meat offal; birds’ eggs; fruits, vegetables, spices, tea, and coffee.

The two sides have also signed the protocol to amend the India-Oman Double Taxation Avoidance Agreement (DTAA), aligning it with international standards on crossborder taxation. Investment flows, both ways, have been robust, reflected in numerous joint ventures in both nations.

Such joint venture investments in Oman are estimated at $776 million as of December 2023. Total FDI inflows from Oman to India during April 2000 to June 2024 stand at $597.14 million, as per a factsheet of the Indian Embassy in Oman.