India – New Zealand Free Trade Agreement

Zero-Duty Access, but at What Cost? Assessing the India-New Zealand Free Trade Agreement

December 23, 2025, marks the formal conclusion of the India-New Zealand Free Trade Agreement (FTA), a pact that promises to eliminate customs duty on 100% of Indian exports to New Zealand while offering reciprocal market access on 70% of tariff lines. Beyond tariff reductions, this FTA includes unique provisions: reserved quotas of 5,000 skilled worker visas and a Working Holiday Visa for 1,000 young Indians annually. While agreements like these reflect India’s growing economic diplomacy, the devil, as always, lies in the details.

The numbers suggest ambition. New Zealand has committed to USD 20 billion in foreign direct investment (FDI) in India over 15 years, and it has extended commitments across 118 services sectors and MFN (Most-Favoured Nation) access in 139. On the other hand, India secures the exclusion of politically and economically sensitive items like dairy, sugar, and certain agricultural products—offering much-needed protection for domestic producers.

An Expanding Map of Governance

India’s appetite for bilateral trade agreements has widened substantially over the past five years. This is the sixth agreement in this period, following similar pacts with nations such as Australia (ECTA, 2022), UAE (CEPA, 2022), and the recently concluded India-UK Comprehensive Economic and Trade Agreement (CETA, 2025). The institutional framework for such agreements pivots on the Ministry of Commerce and Industry, supplemented by advisory inputs from the Department for Promotion of Industry and Internal Trade (DPIIT).

India-New Zealand FTA introduces cooperation clauses not typically seen in prior agreements. It emphasises student mobility—including provisions to secure post-study work visas for Indian students even amidst future policy changes—and focuses on improving "soft" linkages through engagement with New Zealand’s Maori communities. The agreement also formalises technical assistance to bolster horticulture productivity in India, particularly for kiwifruit, apples, and honey, a gesture aimed at ensuring trade benefits extend to grassroots producers.

Progress on Paper, Challenges in Reality

Despite the glowing headlines, several fault lines emerge. For instance, the USD 20 billion FDI promise by New Zealand is spread over 15 years—translating to less than USD 1.5 billion annually. By comparison, Australia attracted over USD 5 billion in Indian investment in the first 18 months of ECTA implementation alone. Will New Zealand’s relatively smaller economic scale limit its ability to fulfill these long-term commitments?

Even the vaunted zero-duty market access is not without complications. Indian exporters often struggle to meet stringent non-tariff barriers (NTBs) like quality standards or sanitary and phytosanitary measures, where New Zealand maintains globally high benchmarks. In many recent FTAs, including ECTA with Australia, Indian exporters faced difficulties in scaling up, as procedural compliance proved cumbersome. Without adequate institutional support—particularly for MSME exporters—such market access remains a paper tiger.

In another overlooked critique, certain bilateral provisions may disproportionately favour New Zealand’s interests. For example, the agreement enables Indian demand for horticultural produce like kiwifruits to be met through tariff rate quotas (TRQs) for seasonal imports. But it remains unclear how successfully domestic cultivators will compete, even with supportive action plans. Past TRQ implementations have struggled with local resistance, reminiscent of the agricultural sector agitation regarding WTO commitments.

A Familiar Structural Problem: Centre-State Dynamics

Another potential complication rests in India’s federal structure. While trade policy is governed by the Centre, sectors like agriculture and horticulture fall squarely under state jurisdiction. The FTA commits to projects for “premium apple cultivation and sustainable beekeeping,” but these well-intentioned initiatives require state-level buy-in and technical capacity, which vary wildly across India. Without clearly defined state participation, the execution risks being uneven, as seen in the underwhelming implementation of horticultural mission schemes in states like Bihar and Uttar Pradesh.

The exclusion of dairy products from the agreement may have political merit—given potential opposition from farming lobbies—but it underscores India’s reluctance to open discussions on longstanding market inefficiencies. Similarly, the FTA’s emphasis on AYUSH systems and traditional knowledge aligns with India’s ambition to position itself as a global wellness hub. However, previous international collaboration efforts, such as under the AYUSH Ministry’s partnership with Germany, saw patchy follow-up and funding issues. How this agreement delivers differently remains to be seen.

Lessons from the Canada-New Zealand FTA

A useful international point of comparison is Canada’s 2015 Free Trade Agreement with New Zealand, which offers some lessons on balancing agricultural sensitivities. Much like India, Canada opted to limit market access for certain products such as sensitive dairy goods, protecting local interests while expanding cooperation in services, digital trade, and education. However, Canada also established clear tariff-phase-out schedules for other agricultural products, offering predictability and time for its domestic farmers to adapt. India’s near-complete exclusion of contentious sectors like dairy relieves short-term pressure but also delays necessary reform discussions for an already oversubsidised sector.

Metrics for Tracking Success

What defines success for the India-New Zealand FTA? At a minimum, a tangible uptick in non-traditional exports—particularly agroforestry, horticulture, and processed food products—must be demonstrated within the first three years. Beyond trade numbers, joint projects in "soft" sectors, such as boosting India’s global wellness brand through AYUSH systems or tangible progress in student mobility programs, must show measurable outcomes.

Yet, data transparency remains key. Past FTAs have often been critiqued for weak institutional monitoring mechanisms. A centralised tracking portal or dashboard should be deployed to measure trade metrics, FDI inflows, and cross-sectoral initiatives. Without robust oversight, the FTA risks becoming another unenforced promise.

Conclusion: Necessary but Insufficient?

The India-New Zealand FTA offers a mix of promise and provocation. It reflects India’s widening global trade ambitions, while carving out provisions that ostensibly support grassroots stakeholders. Yet structural limitations—ranging from underestimated NTB challenges to uneven Centre-State coordination—demand serious attention if the agreement is to escape the fate of being another lofty document with limited on-ground success. Tariff reductions may headline FTAs, but institutional capabilities will determine their legacy.

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