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India Counters Tariff Pressures by Fast-Tracking Free Trade Deal with Oman and Strategic Policy Shifts

Swarnadwip Nath Published Aug 10, 2025, 12:47 PM Updated Sep 18, 2026, 12:26 PM

As the United States ramps up tariffs on Indian goods, escalating to a punishing 50% in August 2025, India is swiftly deploying diplomatic and economic strategies to mitigate the fallout. Central to this effort is the imminent signing of a Comprehensive Economic Partnership Agreement (CEPA) with Oman, a key Gulf trading partner, alongside broader tariff policy shifts to safeguard Indian exports and attract investment. This multifaceted approach aims to secure new market access, bolster trade resilience, and maintain India’s growth momentum in a challenging global trade environment.

The India-Oman Free Trade Agreement: A Strategic Pivot

Negotiations between India and Oman began in November 2023 and are now in the final stages, with an official announcement and signing expected within a few months. The deal, formally called a Comprehensive Economic Partnership Agreement (CEPA), is designed to significantly reduce or eliminate customs duties on a broad spectrum of goods, simplify bilateral trade regulations, and encourage investment flows between the two nations.

Oman is India’s third-largest export destination within the Gulf Cooperation Council (GCC), with bilateral trade surpassing $10 billion in 2024-25. Indian exports to Oman totaled around $4.06 billion, spanning engineering goods, pharmaceuticals, machinery, textiles, and chemicals. Imports from Oman primarily include petroleum products, urea, petrochemicals, and minerals, accounting for over 70% of the total.

The CEPA will enhance the competitiveness of Indian goods by removing or reducing the roughly 5% tariffs currently applied by Oman, while also opening doors for deeper cooperation in services, infrastructure, IT, and logistics sectors. Importantly, negotiations addressed labor protections to safeguard the large Indian expatriate community in Oman, ensuring protections amid Oman’s “Omanisation” policy that requires private companies to prioritize national employment.

India’s Policy Shifts Amid U.S. Tariff Hikes

In the face of the U.S. imposing hefty tariffs on Indian imports—initially 25% in early August, rising to a cumulative 50% by the month's end—India is not standing still. The tariffs mainly target sectors tied to India’s sustained oil imports from Russia and related geopolitical stances. This has led to immediate challenges, including contract cancellations and pricing pressures for exporters.

To counterbalance these effects, India is actively seeking alternative trade partnerships, expediting free trade agreements like the one with Oman, and revising tariff structures to retain export competitiveness globally. Simultaneously, India is leveraging its manufacturing capabilities, skilled workforce, and domestic reforms under the “Make in India” initiative to attract foreign direct investment and diversify its trade portfolio beyond the U.S., exploring markets in the Gulf, Europe, ASEAN, and other regions.

Economic reports indicate India maintains strong GDP growth prospects around 6.4% for 2025-26 despite the tariff headwinds. Moreover, India’s exports to the U.S. continue growing, with competitive advantages in over 20 major product categories, cushioning some tariff impacts.

Economic and Geopolitical Implications

The India-Oman CEPA is more than a tariff-cutting exercise; it represents a strategic realignment in India's trade policy to reduce dependency on vulnerable markets and fortify energy security through reliable Gulf partnerships. Oman’s role as a supplier of crude oil, LNG, and fertilizers aligns with India’s energy needs, and the agreement’s tariff relief on these imports will lower costs for Indian refiners and agriculture sectors.

Additionally, the CEPA is expected to catalyze Omani investments in India’s critical infrastructure projects, including ports, industrial corridors, and digital ecosystems. These moves align with India’s broader objective of integrating the economy with Gulf capital and strengthening maritime connectivity, especially through Omani ports such as Duqm.

While the U.S.-India trade relationship faces strains, India’s determination to protect strategic interests—such as safeguarding farmers and maintaining energy supplies—signals a long-term approach balancing diplomacy, economic pragmatism, and global partnerships.

Conclusion

India’s response to escalating U.S. tariff pressures is marked by agility and strategic foresight. By securing the imminent India-Oman free trade agreement and advancing tariff and trade policy recalibrations, India is protecting its export sectors, nurturing new trade corridors, and solidifying its position as a resilient global economic player. This multifaceted maneuvering underscores India’s commitment to sustaining growth, diversifying markets, and ensuring economic sovereignty amid complex global trade dynamics.

Relevant Sources: Economic Times, Patrika, Moneycontrol, Business Standard, Indian Narrative, India Briefing, NDTV, Hindustan Times, Times of India, Indian Express

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