New Zealand and India Finalize Trade Agreement to Boost Economic Ties

New Zealand and India have officially concluded negotiations on a free trade agreement (FTA), a significant step aimed at enhancing economic relations and potentially doubling bilateral trade within the next five years. Announced on Monday, this agreement is poised to eliminate or reduce tariffs on approximately 95% of New Zealand’s exports to India, with over half of these items becoming duty-free immediately upon the agreement’s implementation.

In exchange, all Indian products will gain duty-free access to the New Zealand market, further solidifying the trade partnership between the two nations. As part of this initiative, New Zealand has pledged to invest $20 billion in India over the next 15 years.

Political Significance and Economic Impact

New Zealand Prime Minister Christopher Luxon emphasized the far-reaching benefits of the agreement, stating, “The gains are wide-ranging and significant. India is the world’s most populous country and is the fastest-growing big economy, and that creates opportunities for jobs for Kiwis, exports, and growth.” This agreement fulfills a campaign promise made by the National Party, which sought to finalize the FTA within its first term in office.

In 2024, two-way trade between the countries reached approximately $1.81 billion. India primarily exported pharmaceuticals to New Zealand, while New Zealand’s exports were largely composed of forestry and agricultural products. Despite this growth, trade volume remains modest compared to India’s total goods trade, which surpassed $1 trillion during the 2024–25 financial year.

Indian Prime Minister Narendra Modi celebrated this achievement, noting in a social media post that the agreement was concluded in just nine months, a testament to the strong political will and shared ambition to deepen economic ties between the two nations.

Exclusions and Future Considerations

The FTA does not include market access for several sensitive sectors, such as dairy, coffee, milk, cream, cheese, yoghurt, whey, caseins, onions, sugar, spices, edible oils, and rubber. This exclusion reflects India’s commitment to protecting its domestic farmers and industries.

As India accelerates its trade negotiations globally, the FTA with New Zealand represents the country’s third trade agreement this year, following similar pacts with Oman and the United Kingdom. This momentum comes in response to recent challenges, including a 50% tariff imposed by the United States on Indian goods.

While the New Zealand government anticipates signing the agreement in the first half of 2026, parliamentary approval remains uncertain. The New Zealand First party, a coalition partner of the National Party with eight of the 123 parliamentary seats, has expressed opposition to the deal. Its leader, Winston Peters, criticized the agreement for not sufficiently benefiting New Zealand, specifically regarding immigration and dairy industry concessions.

The governing coalition currently holds 67 seats, but with the National Party controlling only 48 seats, it will need support from coalition partners, including New Zealand First, to pass the legislation.

As discussions continue, the potential implications of this FTA are vast, not only for trade but also for the economic landscape of both nations. The next steps will be crucial in determining how effectively these two economies can harness the benefits outlined in this ambitious agreement.