What is the India-New Zealand Free Trade Agreement? | Explained
The story so far:
The last India-New Zealand Free Trade Agreement (FTA) was signed in December; Accordingly, New Zealand will impose zero duty on 100% of India’s exports, bringing in $20 billion in Foreign Direct Investment (FDI) by 2030.
What are the important bargains?
India will have zero-duty market access for all its exports to New Zealand. In response, India will relax customs duties on 95% of imports from New Zealand, with 57% of these products becoming duty-free from day one.
New Zealand has committed to invest $20 billion in India over the next 15 years, with strict clawback mechanisms if the investment does not meet the stipulated timeline. Foreign direct investment aims to promote skills mobility and services, creating employment and growth opportunities in 118 sectors. For the first time, New Zealand has agreed to facilitate trade in Ayurveda, yoga and traditional medicine services with India.
The agreement also includes provisions for the support and mobility of Indian skilled workers. Young people, students and professionals will find it easier to live and work in New Zealand.
FTA creates opportunities for India to become a major supplier of skilled workforce in sectors like healthcare, education and construction, along with services like IT professionals, Engineers, Yoga instructors, Indian chefs, Music teachers.
Student mobility, work permits for up to 20 hours a week while studying, and extended post-study work visas are some of the global exposure opportunities for Indian youth.
The agreement also builds on MSMEs and employment opportunities through labour-intensive sectors, including textiles and ready-made garments, leather and footwear, gems and jewellery, engineered goods and processed foodstuffs.
Which sectors did India exclude from the agreement?
In order to protect Indian farmers and small and medium-sized industries, India has refused to grant market access to essential commodities vital to New Zealand such as dairy and agricultural products such as milk, cheese, cream, butter, yoghurt, onions, sugar, edible oils, spices and rubber.
New Zealand will develop focused action plans to develop and enhance the productivity, quality and sectoral capabilities of fruit growers in India, especially for exotic fruits such as kiwi, apple and honey. This collaboration will enable the establishment of centers of excellence, improvement of planting materials, capacity building for growers, technical support for orchard management, post-harvest practices, supply chains and food safety.
Why is FTA important?
The India-New Zealand FTA is less of a breakthrough and more of a framework for deeper cooperation in the future. This is a conscious move by India to increase its global economic footprint. Diversification of trade requires a deep and conscious transformation of the country’s productive sector and its integration into global value chains.
The India-New Zealand FTA is considered to be the fastest concluded agreement, being completed in a record time of nine months after it was announced in March 2025. This agreement improves market access and tariff preferences for India’s exports to New Zealand, while also proving to be a gateway to Oceania and Pacific Island markets. New Zealand is among Oceania’s highest-income economies, with $49,380.
Indian diaspora in New Zealand constitutes 5% of the population i.e. 3,00,000 people. This creates a promising change and creates opportunities for soft power policies between the two countries.
Currently, India’s bilateral goods trade with New Zealand stands at $1.3 billion. The agreement aims to double this figure in the next five years.
India has implemented stringent measures to protect its sensitive sectors such as agriculture and dairy from one of the world’s largest dairy exporters.
This is also one of the first FTAs to be negotiated and concluded by an entirely female-led and female-driven team, from the chief negotiating officer to the New Zealand ambassador.
Why is India accelerating new free trade agreements?
India is strengthening its position by engaging with the Pacific, West Asia and Africa as trading partners and encouraging realignments through bilateral agreements and free trade agreements.
FTAs provide a platform for pursuing unique and region-specific commitments, making room for WTO-plus commitments, particularly in areas such as services, digital trade and investment. Diversification of trading partners means India does not have to depend on traditional markets such as the EU, US and China.
FTAs are aligned with India’s development goals and policies such as Make in India and secure India’s sensitive sectors through technology transfers and production-based incentive programs that can help align Indian manufacturing with global value chains.
Despite not very successful FTA agreements in the past, India is now determined to implement FTAs with many countries, including Russia, Oman, the UK and New Zealand. This marks India’s attempt to secure strategic and geopolitical alliances through economic and trade liberalisation.
This is India’s third free trade agreement this year, following agreements with the UK and Oman. This is part of a broader strategy that India is determined to move forward with after the US imposed high tariffs. Much of India’s trade is dependent on the United States. Bilateral trade between India and the US stands at $132 billion, and the changes made by the US in tariffs are really hurting India’s trade.
India’s exports to the US fell sharply in September and October, falling to 12% and 8.5% respectively. Indo-US free trade agreement is progressing slowly and 50% of tariffs still remain unchanged. This led to separation from the US and the urgent need to diversify India’s trade policies and strategic alliances to attract greener trading venues.
One of the main reasons why Indo-US bilateral talks have stalled is India’s determined policy of not opening its agriculture and dairy sector to concessions in the FTA. India is thus taking an important step from short-term economic partnerships to long-term trade alliances.
The India-New Zealand agreement builds a more investor-friendly structure. India is ready to shed its protectionist image by reducing trade barriers, promoting ease of business and opening up its markets. India’s free trade agreements today go far beyond tariff reductions; they are rather a framework for future cooperation and economic harmony.
What criticisms does the deal face?
This is New Zealand’s first FTA to exclude dairy and agriculture from its remit, and has been heavily criticized in New Zealand by the current government’s coalition partners. New Zealand’s Foreign Minister said the deal was ‘neither free nor fair’ as it bypassed the dairy and agriculture sector, the country’s largest industry, and added that they would vote against the bill when it comes up in the New Zealand Parliament in 2026. India, on the other hand, assumes an easy transition to the law.
In India, FTAs have been criticized for widening trade deficits and providing asymmetric gains as they cause imports from partner countries to grow faster than our exports. The safeguards established by the current India-New Zealand FTA are claimed to cover these risks and protect and promote India’s sensitive sectors through manufacturing cooperation. Its success will be determined as implementation progresses over the years.
What is the way forward?
Although the India-New Zealand FTA is considered historic, it is important to learn from past trade agreements; as most of them resulted in low returns.
India needs to invest in domestic competitiveness, meet global market standards and quality requirements, ensure strong rules of origin, define anti-dumping provisions, strengthen its sensitive sector and MSMEs and formulate them to suit global markets.
If India has to succeed in the global market, it also needs to invest in research and development to improve the quality and competitiveness of its products.
.Saee Pande is a freelance writer focusing on politics, current events, international relations and geopolitics.
