What is the India-New Zealand Free Trade Agreement?

The Hindu: - Published on 30 December 2025

Why in News?

India and New Zealand concluded a landmark FTA in December 2025, signalling a major shift in India’s trade diplomacy. The pact grants 100% zero-duty access to Indian exports in New Zealand and includes a $20 billion FDI commitment by 2030, while India will reduce tariffs on about 95% of New Zealand imports, protecting sensitive sectors. The deal gains significance amid global trade uncertainties and India’s push for trade diversification after higher US tariffs. It is India’s third recent FTA after the UK and Oman, aiming to double bilateral trade from $1.3 billion and strengthen Make in India and global value-chain integration.

Key Bargains: Zero Duty Access and FDI Commitments

1. Benefits for India

New Zealand has agreed to eliminate customs duties on 100% of Indian exports, offering a major boost to India’s labour-intensive sectors such as:

• Textiles and garments
• Leather products
• Gems and jewellery
• Processed food and agricultural products

This zero-duty access significantly enhances the global competitiveness of Indian exports.

2. New Zealand’s Investment Commitment

New Zealand has pledged $20 billion in FDI by 2030, spread over 15 years, with a built-in clawback mechanism to ensure compliance. Investments are expected across 118 sectors, particularly in services, skill development, and high-value manufacturing. The agreement is also projected to generate employment and promote technology transfer.

3. Services Trade and Mobility

The FTA expands cooperation in services and people-to-people links:

• Easier visa norms for Indian IT professionals, engineers, chefs, yoga instructors, and healthcare workers
• Formal recognition and trade facilitation for Ayurveda, Yoga, and traditional medicine
• Enhanced professional mobility, especially in healthcare and construction sectors

4. Youth and Education Opportunities

Indian students in New Zealand will be allowed:

• Up to 20 hours of work per week during studies
• Improved post-study work visa options

This strengthens educational and cultural ties between the two countries.

Protected Sectors: Safeguarding Indian Farmers

India adopted a cautious approach to protect its vulnerable agricultural sectors. Market access has been denied to New Zealand’s dairy products, including milk, cheese, and butter, given New Zealand’s dominance as a global dairy exporter. Other sensitive agricultural products such as sugar, edible oils, spices, and rubber have also been kept outside tariff concessions.

However, cooperation has been agreed upon in non-sensitive areas:

• Establishment of Centres of Excellence for fruits such as kiwi and apples
• Collaboration in honey production, training, and supply-chain development

This balanced approach ensures farmer protection while enabling knowledge exchange.

Why Is India Accelerating FTAs?

1. Trade Diversification: India aims to reduce excessive reliance on the US (with over $132 billion in trade) and expand its footprint in the Pacific, West Asia, and Africa, alongside the EU and China.
2. WTO-Plus Commitments: Modern FTAs go beyond goods and cover services, digital trade, investment protection, and standards, helping India stay competitive in new-age trade regimes.
3. Policy Alignment: The FTA aligns with domestic initiatives such as Make in India and PLI schemes, enabling smoother entry into global value chains. FTAs with Russia and the UK are also in the pipeline.
4. Geopolitical and Soft Power Dimensions: With an Indian diaspora of nearly 300,000 people (around 5% of New Zealand’s population), the agreement strengthens India’s soft power. Notably, the negotiations were completed in a record nine months, led largely by women negotiators.

Criticism and Concerns in New Zealand

The FTA has triggered political debate in New Zealand:

• Coalition partners have criticised the deal as “neither free nor fair” due to the exclusion of dairy and agricultural exports
• The New Zealand Foreign Minister has indicated resistance to passing the FTA bill in Parliament in 2026

In India, concerns persist about a possible widening trade deficit, based on experiences from earlier FTAs where imports grew faster than exports. However, safeguard clauses and phased tariff reductions aim to protect MSMEs and domestic industries.

Way Forward

• Enhancing Domestic Competitiveness: Investment in R&D, quality standards, rules of origin (RoO), and strong anti-dumping measures
• Effective Monitoring: Tracking FDI inflows, export performance, and sector-wise outcomes
• Long-Term Vision: Positioning New Zealand as India’s gateway to Oceania, with a goal to raise bilateral trade from $1.3 billion to $2.6 billion within five years

Conclusion

The India–New Zealand FTA represents a careful balance between openness and protection. By combining zero-duty market access, strong investment commitments, and safeguards for sensitive sectors, the agreement has the potential to strengthen India’s position in the global economy while supporting inclusive growth. If implemented effectively, it could become a model for India’s future trade agreements.