India-New Zealand FTA
By Dr. D.K. Giri
(Prof of Practice, NIIS Group of Institutions)
India and New Zealand have just concluded negotiations on a comprehensive Free Trade Agreement (FTA) marking a significant milestone in their economic partnership. The negotiations, finalised on 22 December aim at doubling the bilateral trade over the next five years, synergising the respective strengths of both countries. Union Minister for Commerce, Piyush Goel with his New Zealand counterpart Todd McClay with their respective teams, closed the negotiations in New Delhi.
To mention the key highlights of the Agreement, India will gain zero-duty access for all goods exports to New Zealand, while New Zealand will receive duty concessions on 70 per cent of India’s tariff lines, covering 95 per cent of its export to India.
On investment, New Zealand has committed to facilitating investments amounting to 20b USD in India over the next 15 years. Such investments will focus on manufacturing, infrastructure, services and innovation. On service sector, in which India has competitive advantage owing to its large base of manpower, New Delhi has secured commitments across 118 services including IT, professional services, education, financial services, tourism and construction. On people’s mobility, again, one of the India’s top priorities, the Agreement includes a dedicated quota of 5000 temporary employment visas for Indian professionals and 1000 on work and holiday visas.
If we look at sectoral opportunities, four major sectors may receive a boost out of this Agreement. They are textiles, apparel, pharmaceuticals, agriculture, IT and services. Zero-duty access in textile and apparel improves India’s price competitiveness in 1.9b USD textiles import market of New Zealand.
Pharmaceuticals will have increased access to New Zealand’s 1.4b USD pharmaceutical import market. Cooperation in agricultural productivity will benefit India with New Zealand establishing Centres of Excellence for apples, Kiwi fruit, and honey. India’s IT sector is poised to benefit from enhanced access to New Zealand’s growing service market.
The strategic significance of the FTA between India and New Zealand is part of New Delhi’s broader strategy to diversify its exports and strengthen ties with countries in the Indo-Pacific region. The Agreement is most likely to enhance economic growth, create jobs and increase people-to-people connections. Furthermore, it aligns with India’s Act East Policy and New Zealand’s Indo-Pacific Strategy.
While it sounds all good, the Agreement might come across some challenges during its implementation. These include the usual Non-Tariff Barriers (NTBs) on account of divergent regulatory standards, exclusion of India’s dairy sector, implementation capacity – constraints of MSMEs and service providers and potential competition for Indian industries. However, both countries are working on addressing these potential challenges through continued dialogue and cooperation.
New Delhi safeguarded the interests of its farmers and dairy producers, which is considered politically sensitive. That is why India made no concessions on import of dairy products, onions, sugar, spices, edible oils and rubber. Piyush Goel said, “The government has been sensitive in protecting interests of farmers and dairy producers”. He added, “Rice, wheat, soya and various other agricultural products have not been opened up with any access”.
On the other hand, New Zealand’s Foreign Minister Winston Peters criticised the deal, saying it gives too much away, especially on immigration, and does not benefit New Zealand’s dairy farmers. He said in post X, on Monday, “The FTA is neither free nor fair” and warned that it is a ‘bad deal for New Zealand as it gets too little from India’.
It is understandable as Peters belongs to a party called New Zealand First, with a nationalist political ideology and a partner in the ruling coalition. Peters also cautioned their coalition partner not to “rush into concluding a low-quality deal with India as getting parliamentary majority for that deal was uncertain”. However, according to Peters himself, the Prime Minister Luxon did not heed his pleas and chose to conclude the deal pending the formal signing of the Agreement.
Hailing the FTA, to be signed in the first of 2026, Prime Minister Narendra Modi said, “Concluded in just nine months, the historic milestone reflects a strong political will and shared ambition to deepen economic ties between our two countries”. Perhaps Modi had in the back of his mind over 16-year negotiations for an FTA with the European Union which are still not over. PM Modi spoke to his New Zealand counterpart Christopher Luxon over the phone when the two leaders jointly announced conclusion of the “historic, ambitious, and mutually beneficial India-New Zealand Free Trade Agreement.
According to an official statement, from the External Affairs Ministry, the FTA would significantly deepen bilateral economic engagement, enhance market access, promote investment flows, strengthen strategic cooperation between the two countries, and also open up new opportunities for innovators, entrepreneurs, farmers, MSMEs, students and youths of both countries across various sectors.
Specifically, on the economic impact, the FTA is projected to double the bilateral trade within five years that is largely due to India’s exports to New Zealand availing zero-duty access on almost all tariff lines. At the same time, New Zealand’s exports to India are expected to increase by 1.1b USD to 1.3b USD annually over the next two decades. So, the Agreement is likely to deliver overall economic benefits by creating new opportunities for businesses of both countries. Indian exporters can explore new opportunities in sectors like textiles, pharmaceuticals and agriculture while New Zealand’s companies can benefit from India’s growing market for services, manufacturing and infrastructure. MSMEs and Startups in both countries with comparative advantage to India in numbers of such entities, can leverage the Agreement to expand their footprints.
The Agreement will help Indian exporters, reeling under the impact of unexpected 50 per cent tariffs imposed by the Trump Administration on Indian goods. Since then, Indian exporters have been diversifying their shipments to the India-Pacific region. India has already signed a trade pact with Australia. Commerce Minister Goel assured that the Agreement with New Zealand will provide a fillip to labour-intensive sectors such as textiles, apparel, leather, rubber, footwear and home décor. It will also encourage export of automobiles, auto components, machinery, electronic goods and electrical and pharmaceutical products.
The employment visas although temporary, will cover AYUSH practitioners, Yoga instructors, Indian chefs and music teachers, as well as from high-demand sectors like IT, engineering, healthcare, education, and construction, strengthening professional and semi-professional mobility and services personnel.
The India-New Zealand FTA is expected to be signed in coming months, paving a new way for its implementation. Both countries are working on addressing the possible challenges while maximising the benefits accruing from this Agreement. At any rate, with the FTA, India and New Zealand are set to take their bilateral trade to the next level. This Agreement should also deliver concomitant political and strategic benefits. Credit for having another FTA with a country in the Indo-Pacific region must be given to the current Indian government. — INFA