New Zealand and India Finalize Trade Agreement to Boost Bilateral Ties

New Zealand and India have concluded negotiations on a free trade agreement (FTA) that aims to significantly enhance economic relations between the two nations. Announced on March 4, 2024, the agreement is expected to double bilateral trade over the next five years, with provisions for tariff reductions on a wide range of goods.

Under the terms of the FTA, tariffs will be eliminated or reduced on approximately 95% of New Zealand’s exports to India. More than half of these products will become duty-free from the first day the agreement takes effect. In exchange, all Indian goods will gain duty-free access to the New Zealand market. Additionally, New Zealand has pledged to invest $20 billion in India over the next 15 years, underscoring its commitment to strengthening trade ties.

Christopher Luxon, New Zealand’s Prime Minister, emphasized the significance of this deal, 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 governing National Party during the 2022 election to finalize a free trade deal with India within its first term.

Current Trade Landscape and Future Prospects

As of 2024, two-way trade between New Zealand and India was valued at approximately $1.81 billion. India predominantly exports pharmaceuticals to New Zealand, while New Zealand’s exports are largely made up of forestry and agricultural products. Despite this growth, the trade volume remains relatively small compared to India’s total goods trade, which surpassed $1 trillion in the 2024-25 financial year.

Indian Prime Minister Narendra Modi celebrated the agreement as a historic milestone, stating that it reflects a strong political will and shared ambition to deepen economic ties between the two countries. The agreement was concluded in just nine months, illustrating the commitment from both sides to enhance bilateral relations.

However, the agreement does not cover several sensitive sectors. India has opted to exclude market access for products such as dairy, coffee, and edible oils, citing the need to protect domestic farmers and industries amidst increasing global competition. This decision comes as India accelerates trade discussions with various global partners, particularly in light of recent trade challenges, including a new 50% tariff on Indian goods entering the United States.

Political Implications and Legislative Challenges

The FTA is slated to be signed in the first half of 2026. Despite the optimistic outlook, parliamentary approval remains uncertain. The National Party, which currently holds 67 seats in the 123-seat parliament, requires support from coalition partners to pass the agreement. Notably, New Zealand First, a coalition partner holding 8 seats, has announced its intention to oppose the deal.

Winston Peters, leader of New Zealand First, criticized the agreement, arguing it does not adequately benefit New Zealand. He stated, “The deal gives too much away, especially on immigration, and does not get enough in return for New Zealanders, including on dairy.” This dissent highlights the potential for significant political debate ahead as the government seeks to secure the necessary support for the agreement.

In conclusion, while the finalized FTA between New Zealand and India presents substantial opportunities for both nations, its future hinges on navigating the political landscape and securing legislative approval.