What Is the India–New Zealand Free Trade Agreement?

Context:

• India and New Zealand concluded a Free Trade Agreement (FTA) in December 2025, marking a significant step in India’s trade diversification strategy.

• The agreement aims to boost bilateral trade, enhance investment flows, and deepen strategic ties, while safeguarding sensitive domestic sectors.

Key Highlights:

Trade Liberalisation Commitments:

• New Zealand offers zero-duty access on 100% of India’s exports, providing full market access.

• India will reduce tariffs on 95% of imports from New Zealand, with 57% of tariff lines becoming duty-free immediately.

• Dairy and select agricultural products are excluded by India to protect farmers and rural livelihoods.

Investment and Economic Cooperation:

• New Zealand committed $20 billion in Foreign Direct Investment (FDI) by 2030, covering 118 sectors.

• Focus on labour-intensive industries such as textiles, leather, gems and jewellery, engineering goods, and processed foods, benefiting MSMEs and employment generation.

Services and Mobility:

• The FTA facilitates trade in Ayurveda, yoga, and traditional medicine services.

• Supports mobility of Indian skilled professionals, students, and workers, enabling opportunities to live and work in New Zealand.

Agricultural Cooperation:

• New Zealand to assist India with action plans for fruit growers, improving productivity and quality.

• Special focus on exotic fruits like kiwifruit and apples, without compromising domestic agriculture safeguards.

Strategic and Trade Objectives:

• The agreement aims to double bilateral merchandise trade from the current $1.3 billion within five years.

• Part of India’s broader effort to reduce dependence on traditional markets such as the EU, US, and China.

• This is India’s third FTA in 2025, after agreements with the UK and Oman.

Diaspora and Soft Power:

• The Indian diaspora constitutes ~5% of New Zealand’s population (around 3 lakh people).

• Acts as a bridge for cultural exchange, education ties, and soft power diplomacy.

Criticism and Concerns:

• In New Zealand, criticism centres on the exclusion of dairy and agriculture.

• In India, FTAs are often criticised for widening trade deficits, necessitating careful implementation.

Relevant Prelims Points:

• FTA: Trade agreement aimed at reducing tariffs, quotas, and non-tariff barriers.

• FDI: Long-term investment by a foreign entity in productive assets.

• Issue: Balancing trade liberalisation with protection of sensitive sectors.

• Benefits:

  • Market access for Indian exports

  • MSME growth and employment

  • Services sector expansion

• Challenges:

  • Risk of trade imbalance

  • Domestic industry competitiveness

Relevant Mains Points:

• Facts & Provisions:

  • Zero-duty access for Indian exports to New Zealand

  • Tariff liberalisation on 95% of imports into India

• Conceptual Clarity:

  • FTAs promote comparative advantage but require safeguards for vulnerable sectors.

• Concerns:

  • Long-term impact on trade balance

  • Adjustment challenges for domestic producers

• Way Forward:

  • Periodic review of tariff concessions

  • Strengthening MSME competitiveness

  • Leveraging diaspora networks for trade and investment

UPSC Relevance (GS-wise):

• GS 2: International Relations, Bilateral Agreements, Diaspora

• GS 3: Indian Economy, Trade Policy, Investment, MSMEs