With announcement of 50% tariffs by the United States on several labour-intensive exports from India, sources have indicated that India is exploring new markets for these products in West Asia and Europe to cushion exporters from the impact of tariffs.Sources have pointed out that the while measures are underway to boost domestic consumption as well as to roll out the Export Promotion Mission soon, negotiations for a Free Trade Agreement (FTA) with the 27-nation bloc of the European Union (EU) is going on well.EU’s import basket of Indian labour-intensive products is similar to the US, where they will now face high tariffs.
An Increase in exports is likely to the European Free Trade Association (EFTA), which India’s FTA is slated to come into effect soon. The EFTA bloc comprises of Switzerland, Norway, Iceland, and Liechtenstein. The India-UK FTA also likely to be implemented by next year.Sources have told CNBC TV18 that India’s FTA (Free Trade Agreement) with Oman likely to be announced in less than 3 months after nod from both nations’ Union Cabinets.While the India-Oman FTA undergoing legal vetting after translation in Arabic, a Bilateral Investment Treaty (BIT) is separately under negotiation with Saudi Arabia. As per sources, FTA talks are underway with the Gulf Cooperation Council (GCC), and the possibility remains open for separate FTAs with GCC members.
Oman is the third largest export destination among the GCC (Gulf Cooperation Council) countries for Indian goods and services, with 80% of Indian products currently attracting 5% import duty in Oman.If signed, an FTA with Oman would the second such agreement India has with a GCC country, after its trade deal with the UAE came into effect in May 2022.In May, CNBC-TV18 had reported that the last biggest hurdle for the India-Oman FTA was the degree of “Omanisation” being practiced by the Middle Eastern country.Oman’s “Omanisation” policy aims at replacing foreign workers with locals across sectors, and the policy keeps altering across sectors in terms of percentage of locals being hired.Government sources had told that India wants guarantees in opportunities and access for its workers in Oman, wants the degree of “Omanisation” across sectors to be frozen in the FTA to protect long-term interests of Indian workers. In the fifth round of talks in January, Oman had sought revision of market access on some products even after conclusion of FTA negotiations.While India hadn’t sought any duty concessions in 125 to 130 tariff lines, which include products like liquor and cigarettes, it is expected to gain greater market access for its services sector and for 98% of its goods in Oman. Sources had indicated that both the countries have discussed the flagged issues, and changes in the negotiated positions were likely to be minimal.Meanwhile, the Indian industry had opposed duty concessions for Oman’s petrochemical products to avoid a glut of low-cost imports which may potentially impact India’s domestic industry. Sources had explained that pricing of feedstock constitutes 65% to 70% of the total cost of petrochemical products like Polyethylene (PE), Polyethylene Terephthalate (PET), Polypropylene (PP) and Polyvinyl Chloride (PVC). Due to its surplus mineral wealth and availability of petrochemical products, Oman enjoys a natural advantage in terms of competitiveness of such products vis-à-vis India.Bilateral trade between India and Oman had declined from $12.39 billion in FY 2022-23 to $8.94 billion in FY 2023-24. India’s merchandise imports from Oman had dropped to $4.52 billion in FY 2023-24, from $7.9 billion in FY 2022-23. While petroleum products and urea comprise of 70% of India’s imports from Oman, other products include ethylene and propylene polymers, pet coke, chemicals, gypsum, and iron and steel. India’s exports to Oman had risen from $2.25 billion in FY 2018-19 to $4.42 billion in FY 2023-24.
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