Explained: What is a free trade agreement, as India inks pact with Oman

New Delhi: India on Thursday signed a trade pact -- Comprehensive Economic Partnership Agreement (CEPA) -- with Oman, its 17th deal so far as the country aims to boost bilateral trade and investments.

Other regions and countries with which India has signed such agreements include the four-nation European bloc EFTA, Japan, Korea, and Australia.

Since 2014, India has signed six trade pacts with Mauritius, the UAE, Australia, EFTA, and the UK.

What is a free trade agreement (FTA) It's an economic arrangement between two or more countries where they agree either to end or significantly reduce customs duties on the maximum number of goods traded between them, besides cutting down non-trade barriers on a significant value of imports from partner countries and easing norms to promote services exports and bilateral investments.

Benefits of FTAs Zero-duty entry into partner country markets helps in the diversification and expansion of export markets.

Such pacts attract foreign investment to stimulate domestic manufacturing. They allow access to raw materials, intermediate products and capital goods for value-added manufacturing.

FTAs signed by India so far India has inked trade deals with Sri Lanka, Bhutan, Thailand, Singapore, Malaysia, Korea, Japan, Australia, the UAE, Mauritius, the 10-nation bloc ASEAN (Association of Southeast Asian Nations), and four European nations' bloc EFTA (Iceland, Liechtenstein, Norway, and Switzerland).

In addition, India is negotiating trade agreements with a number of its trading partners, including the US, New Zealand, the European Union (EU), Chile, Peru, and Israel.

India-Oman CEPA Oman will remove taxes or customs duties on India's labour-intensive products such as textiles, gems and jewellery, leather, footwear, sports goods, plastics, furniture, agricultural products, engineering goods, pharmaceuticals, medical devices, and automobiles.

On the other hand, Oman will get duty concessions with quotas on products such as dates, marbles, and petrochemicals. India is offering tariff liberalisation on 77.79 per cent of its total tariff lines (12,556) or product categories that cover 94.81 per cent of India's imports from Oman by value.

It is expected to come into force from the first quarter of the next fiscal year.

Bilateral trade between India, Oman India's exports stood at USD 4.1 billion in FY25, led by naphtha (USD 747.6 million) and petrol (USD 561 million), alongside calcined alumina (USD 313 million), machinery (USD 231 million), aircraft (USD 165 million), rice (USD 182 million), iron and steel articles (USD 120 million), beauty and personal care products (USD 128.6 million) and ceramic products (USD 79.9 million).

While imports were USD 6.6 billion, it was dominated by crude oil (USD 1.1 billion), liquefied natural gas (USD 1.1 billion), and fertilisers (USD 1.1 billion).

Exclusion or negative list To safeguard its interest, sensitive products have been kept in this category by India without offering any concessions.

It includes 2,789 tariff lines. It also includes agriculture products such as dairy, tea, coffee, rubber, and tobacco products; gold and silver bullion, jewellery; chocolates; and other labour-intensive products such as footwear, sports goods; and scrap of many base metals.