India-Gulf Trade: Investment, Ports, and CEPAs in 2026

Analysis | Read time: 10 minutes

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India-Gulf trade reached a record USD 178.56 billion in fiscal year 2024-25, representing 15.42% of India’s total global trade^[1].

Gulf-Asia trade reached USD 516 billion in 2024, approximately double the volume of Gulf-West trade^[3].

As both regions navigate shifting supply networks, corporate entities are reorganizing operations to protect market positions, and the decisions they make in the next twelve months will define their position in the corridor for the rest of the decade^[3].

Trade Route Disruptions and Freight Pressures

Rising freight tariffs, increased maritime insurance premiums, and systemic delays pressure traditional trade routes^[6]. Conflict in West Asia directly affects shipping schedules, working capital, and customer confidence^[7]. Exporters carry particular exposure in the Eastern Strait of Hormuz, where critical transit vessels operate^[8]. Companies have responded by shifting operations to non-Gulf ports and adopting new logistics corridors^[9].

Sovereign Capital and Private Investment

Gulf sovereign wealth funds redirected capital toward developed markets and Western technology sectors during 2025^[1]. That pivot caused a 70% contraction in deployments to India, which fell to USD 5.7 billion in 2025 from USD 20.1 billion in 2024^[1]. Analysts treat this as a strategic pause rather than a retreat: cumulative foreign direct investment from the Gulf to India still exceeded USD 31 billion as of September 2025^[2].

Private corporate flows continue to grow despite the dip in sovereign fund activity^[1]. The India-based Lulu Group committed INR 5,000 crore, approximately USD 600 million, to construct food processing and retail facilities in India^[1]. Concurrently, the UAE-based Sharaf Group announced INR 5,000 crore to build inland logistics parks and dry ports^[1]. These private commitments establish stable physical infrastructure to support future trade volumes^[1].

Strategic state-backed initiatives complement these private expansions^[11]. Under the I2U2 framework, the UAE committed USD 2 billion to build integrated agricultural food parks in India, employing water conservation and climate-smart technologies to reduce waste and maximize crop yields^[11]. The project secures food supply corridors for the Gulf while connecting nearly two million Indian farmers to international buyers^[11].

SME Support and the RELIEF Scheme

Small and medium enterprises face severe constraints when managing macroeconomic shocks^[7]. A Singapore Business Federation poll found that only 36% of SMEs reported confidence in managing volatility, compared to 78% of large corporations^[14]. Over half of the firms surveyed expressed deep concern about their long-term viability if disruptions persist past six months. [14] Key pressure points include elevated energy prices and rising shipping costs^[14].

Indian Micro, Small, and Medium Enterprises in garments, textiles, leather, gems, and engineering goods carry the greatest vulnerability due to thin margins and low inventory buffers^[7]. To protect these exporters, the Ministry of Commerce and Industry launched the INR 497 crore RELIEF scheme on March 19, 2026, managed by the Export Credit Guarantee Corporation of India^[8].

Component I: existing policy holders

The first component allocates INR 56 crore to support existing insured exporters^[8]. It holds insurance premiums at pre-disruption rates for shipments bound for ten specified countries, covering consignments with onboard bills of lading dated between February 14 and March 15, 2026^[8]. It also extends export obligations falling due between March 1 and May 31, 2026, pushing the deadline to August 31, 2026, without penalty^[4].

Component II: prospective export shipments

The second component, with an outlay of INR 159 crore, supports upcoming shipments without prior cover, applying to consignments granted bills of lading between March 16 and June 15, 2026, excluding energy shipments^[8]. On April 17, 2026, the government expanded eligible destinations to include Egypt and Jordan^[16]. This component caps loss coverage at 95% for new policies to encourage credit insurance adoption among first-time exporters^[8].

Component III: MSME freight support

The third component allocates INR 282 crore specifically for non-insured MSME exporters^[8]. It reimburses up to 50% of extraordinary freight and insurance surcharges incurred on shipments between February 14 and March 15, 2026, capped at INR 50 lakh per exporter^[8]. India is also in advanced discussions to establish a domestic Protection and Indemnity insurance club, which will reduce dependence on foreign insurers for shipowner liability claims^[8].

Green Energy Partnerships and Targets

National development strategies — Saudi Vision 2030, UAE Centennial 2071, and Oman Vision 2040 — drive large clean energy investments across the Gulf^[1].

In late 2025, Saudi Arabia connected 12.3 gigawatts of solar and wind capacity to its national grid and set a target of 22 gigawatt-hours of energy storage projects by 2026^[19] . India’s solar capacity reached 129.92 GW and wind capacity reached 53.99 GW over the same period^[19] .

This clean energy alignment attracts cross-border private investment^[1] . The Saudi-based firm Al Fanar committed USD 700 million to wind and solar assets in Gujarat and Rajasthan^[20].

Collaborative projects also focus on green hydrogen production: the NEOM Green Hydrogen Project in Saudi Arabia reached 80% completion by early 2025, while Oman expects commercial start-up of Phase 1 of its HyPort Duqm project in late 2026^[1].

Both initiatives align with India’s target to produce five million metric tons of green hydrogen annually by 2030^[1] .

Port Diversification Outside Chokepoints

Approximately 45% of India’s crude imports, half of its LNG imports, and 90% of its LPG imports pass through the Strait of Hormuz^[22]. To secure the USD 11.8 billion agricultural and food export trade to West Asia, India is redirecting logistics toward Omani ports located outside the Persian Gulf chokepoint^[9]. Sohar, Salalah, and Duqm each serve distinct functions in this corridor^[24].

Sohar Port

Sohar Port operates as a 21 million square meter deep-sea hub containing dedicated logistics, petrochemicals, and metals clusters^[24]. It holds Oman’s first terminal dedicated to bulk agricultural cargo, allowing Indian exporters to land food products safely outside the Persian Gulf^[24]. From Sohar, cargo moves overland into the UAE and Saudi Arabia via Oman’s modern road network^[24].

Salalah and Duqm

The Port of Salalah handles over 2,500 vessel calls annually and connects directly to Oman’s USD 10 billion GCC-linked road network^[24]. An advanced wave-dampening system reduces ship movement in the harbor to enable rapid container unloading^[24]. Further south, Duqm serves as the entrance to the largest special economic zone in the Middle East, where Indian manufacturers can process raw materials and distribute products duty-free^[24].

Fujairah petroleum hub

The UAE’s Port of Fujairah, located outside the Strait of Hormuz, holds strategic petroleum storage facilities that give India a secondary reserve during periods of regional volatility^[28]. Shipping trade data shows Fujairah holds capacity for roughly 14 million cubic meters of petroleum products, giving Indian importers a buffer against immediate maritime blockades^[28].

Market Entry Conditions by GCC Country

Bilateral trade volumes reflect the regulatory structures of individual GCC markets, and the India-UAE CEPA is the clearest illustration of how tariff design shapes outcomes^[27].

Under that agreement, bilateral trade grew to USD 101.25 billion in fiscal year 2025-26^[31]. India’s trade deficit with the UAE reached USD 26.53 billion, with imports valued at USD 63.89 billion against exports of USD 37.36 billion^[31].

This imbalance stems from tariff asymmetry: the UAE maintains average tariffs below 4%, while India’s trade-weighted tariff sits at approximately 12.6%, granting UAE exporters a much larger cost benefit in the Indian market than Indian exporters receive in the UAE^[15].

Oman: the new CEPA baseline

The India-Oman CEPA, which entered into force on June 1, 2026, offers a more balanced framework^[27]. It provides immediate duty-free access on 98.08% of Oman’s tariff lines, covering 99.38% of India’s export value^[27]. Before this agreement, only 15.33% of Indian exports entered Oman duty-free, with the rest facing a standard 5% tariff^[5].

India, in turn, reduced or eliminated customs duties on 77.79% of its tariff lines, covering 94.81% of imports from Oman^[27].

Beyond physical goods, the Oman CEPA opens 127 service sub-sectors^[25]. Business visitors can stay for up to 90 days, independent professionals up to 180 days, and intra-corporate transferees up to four years^[5]. This mobility path supports nearly 6,000 active India-Oman joint ventures^[25].

Saudi Arabia: tax incentives and nationalization quotas

Foreign corporations in Saudi Arabia pay a 20% tax on profit shares and must comply with the Nitaqat nationalization quotas, which mandate specific percentages of Saudi citizens in the workforce^[8]. The Kingdom offsets this with 30-year tax exemptions for international firms establishing their regional headquarters in Riyadh, and business registration takes two to four weeks^[34].

Bahrain and UAE: low-cost and fast-entry options

Bahrain currently maintains a 0% corporate tax rate and permits 100% foreign ownership in most commercial sectors, with registration completing in one to two weeks^[34]. The Kingdom plans to introduce a 10% corporate income tax in 2027 on profits exceeding BHD 200,000. [36] In the UAE, a 9% federal corporate tax applies to profits above AED 375,000, and registration offices complete business setups in one to three days^[30].

Digital Payments and E-Commerce

In February 2024, the UAE and India launched the JAYWAN debit card scheme, built on India’s RuPay payment stack^[6].

The system integrates India’s Unified Payments Interface with the UAE’s Aani payment gateway, allowing residents to conduct transactions in local currencies^[16]. This eliminates expensive foreign exchange conversions and reduces dependence on foreign credit networks^[42].

The GCC e-commerce market reached USD 584.8 billion in 2025, and analysts project its value to reach USD 2.08 trillion by 2034^[39]. To capture this market, Indian e-commerce brands are establishing local UAE subsidiaries^[39]. Free zones such as the Meydan Free Zone in Dubai issue trade licenses in under an hour and secure local customs codes within three days^[39].

By maintaining a local UAE presence, Indian exporters comply with CEPA origin rules, avoid standard import tariffs, and use Dubai’s logistics network to distribute goods across the GCC, Africa, and Europe^[43].

What Comes Next for the Corridor

The ongoing negotiations for a comprehensive India-GCC Free Trade Agreement, formally launched in February 2026, will soon replace the current patchwork of individual bilateral CEPAs^[2].

A region-wide pact will introduce a unified regulatory framework across all six member states, removing the fragmented tax and tariff systems that corporate legal teams currently navigate market by market^[2].

The more consequential shift may be institutional rather than commercial. Upcoming negotiations for a bilateral Social Security Agreement with Oman will guarantee the portability of retirement benefits for Indian professionals working in the Gulf^[25]. When workers can transfer pension entitlements across borders, companies can retain senior talent on long-term assignments without asking those individuals to forfeit decades of contributions.

That shift, from trade facilitation to institutional wealth preservation, will change how Indian firms structure their Gulf workforce strategies^[25].

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