Understanding the India and New Zealand FTA Discussions

By Abhisht Chaturvedi

Indian PM Narendra Modi Meets New Zealand PM Christopher Luxon

On March 16, 2025, India and New Zealand announced the resumption of discussions towards Free Trade Agreement (FTA) negotiations, breathing new life into a process that had languished since 2015. This development, unveiled during New Zealand Prime Minister Christopher Luxon’s visit to New Delhi, marks a pivotal moment in bilateral relations. With trade currently valued at $1.7 billion (2023-24) and a remarkable 30% growth in 2024, both nations are poised to leverage this FTA to achieve a tenfold increase in trade over the next decade. The ambitious 60-day timeline set for concluding the deal underscores the urgency and optimism surrounding this partnership. This article delves into the history, stakes, challenges, and broader implications of the India-New Zealand FTA discussions as of March 21, 2025.

The journey toward an India-New Zealand FTA began in April 2010 with the launch of negotiations for a Comprehensive Economic Cooperation Agreement (CECA). The CECA aimed to enhance trade in goods, services, and investment, reflecting the complementary strengths of both economies. India, with its burgeoning pharmaceutical and IT sectors, sought greater market access in New Zealand, while New Zealand, a global leader in dairy and agricultural exports, eyed India’s vast consumer base.

However, after nine rounds of talks, negotiations stalled in 2015. The primary sticking point was India’s reluctance to lower tariffs on dairy and agricultural products, a sector critical to New Zealand’s economy but equally sensitive for India’s millions of small-scale farmers. New Zealand’s average import tariff of 2.3% starkly contrasted with India’s 17.8%, highlighting a structural disparity that complicated concessions. Additional issues, such as differing regulatory standards and limited political momentum, further delayed progress.

For nearly a decade, the FTA remained on the back burner, overshadowed by India’s trade pacts with Japan, South Korea, and Australia, and New Zealand’s focus on agreements with China and the European Union. Yet, shifting global dynamics—rising protectionism, supply chain disruptions, and the need for diversification—prompted both nations to revisit this unfinished agenda in 2025.

The catalyst for this revival was Luxon’s five-day visit to India from March 16-20, 2025. Meeting with Indian Prime Minister Narendra Modi and Commerce Minister Piyush Goyal, Luxon emphasized the FTA as a “game-changer” for bilateral ties. On March 18, he boldly proposed concluding the agreement within 60 days, a timeline Goyal echoed with equal enthusiasm, citing India’s rapid 90-day FTA with the UAE as precedent. Formal negotiations are slated to begin in April 2025, setting the stage for an intensive diplomatic sprint.

This renewed push aligns with broader economic strategies. India, facing potential U.S. tariffs under a second Trump administration, is accelerating trade diversification. New Zealand, meanwhile, seeks to reduce reliance on China, its largest trading partner, amid geopolitical tensions. The FTA announcement coincided with other bilateral milestones, including a codeshare agreement between Air India and Air New Zealand and negotiations on skilled worker mobility, signaling a holistic strengthening of ties.

Bilateral trade between India and New Zealand, though modest at $1.7 billion in 2023-24, has shown resilience. India exports pharmaceuticals, textiles, and IT services, while New Zealand supplies dairy, wool, fruits, and timber. The 30% trade surge in 2024 reflects growing demand, yet untapped potential remains vast. The FTA’s goal of a tenfold increase—to approximately $17 billion by 2035—is ambitious but grounded in complementary strengths.

For New Zealand, India’s 1.4 billion consumers offer a lucrative market for dairy, meat, and horticultural products like apples and kiwis. Dairy, accounting for a significant portion of New Zealand’s $100 billion export economy, is a cornerstone of its negotiating stance. In return, New Zealand could ease visa restrictions and market access for Indian IT professionals and pharmaceutical firms, sectors where India excels globally.

India stands to gain from New Zealand’s expertise in agriculture, renewable energy, and education. Enhanced access to wool and timber could bolster India’s textile and construction industries, while collaboration in green technology aligns with India’s 2070 net-zero target. Tourism, too, is a promising frontier—New Zealand welcomed 87,000 Indian visitors in 2023, a 23% rise, with millions more eyeing it as a top destination.

Sectoral Focus: Key Areas of Negotiation

Agriculture and Dairy: New Zealand’s push for dairy access remains the FTA’s most contentious issue. India’s tariffs on dairy products (30-60%) protect its 80 million dairy farmers, a politically sensitive constituency. New Zealand, unwilling to exclude dairy, argues for phased tariff reductions. A potential compromise could involve quotas or niche dairy products less threatening to Indian producers.

Services: India seeks greater mobility for its IT and pharma professionals, leveraging New Zealand’s demand for skilled labor. A parallel negotiation on professional mobility, announced during Luxon’s visit, could facilitate this, though New Zealand may tie concessions to trade-offs in goods.

Manufacturing and Technology: India’s pharmaceutical exports could benefit from streamlined regulatory approvals in New Zealand, while joint ventures in aerospace and renewable energy—sectors Luxon highlighted—offer innovation opportunities.

Tourism and Connectivity: The Air India-Air New Zealand codeshare, spanning 16 routes, and talks of a Delhi-Auckland direct flight by 2028, aim to boost tourism and business travel, reinforcing economic integration.

Challenges: Navigating Sensitivities

Despite the optimism, significant hurdles loom. The dairy impasse exemplifies the tariff disparity challenge. India’s protective agricultural policies, rooted in food security and rural livelihoods, clash with New Zealand’s export-driven model. Goyal’s assertion that “no FTA is negotiated with a gun to anyone’s head” underscores India’s insistence on safeguarding domestic interests, a stance honed in talks with the EU and UK.

Regulatory alignment poses another obstacle. Differences in sanitary and phytosanitary standards, intellectual property rights, and environmental regulations could prolong negotiations beyond the 60-day target. Moreover, New Zealand’s small market size (5 million people) limits its appeal for India compared to larger partners like the EU, potentially tempering India’s concessions.

Political will, while strong, faces domestic pressures. In India, farmer protests against trade liberalization could resurface, while New Zealand’s dairy lobby will resist any deal sidelining its interests. The compressed timeline adds further complexity—experts question whether a comprehensive FTA, encompassing goods, services, and investments, can be finalized so swiftly without compromising depth.

Strategic Significance: Beyond Economics

The FTA transcends trade, reflecting broader geopolitical currents. For India, it’s a plank in its Indo-Pacific strategy, countering China’s regional influence alongside pacts like the Quad (India, U.S., Japan, Australia). New Zealand, a Pacific nation with a low-tariff regime, strengthens India’s outreach to like-minded democracies.

Amid global trade tensions—exacerbated by U.S. protectionism under Trump—the FTA offers resilience. India’s recent FTAs with Australia and the UAE, and ongoing talks with the EU and UK, signal a proactive pivot. New Zealand, diversifying from China (which absorbs 30% of its exports), gains a stable partner in India, the world’s fifth-largest economy.

Defense and security ties also deepen. Joint military exercises and potential cooperation in critical minerals align with shared interests in a free Indo-Pacific. People-to-people links—11% of Auckland’s population is of Indian descent—further cement this partnership, fostering cultural and economic bridges.

If successful, the India-New Zealand FTA could set a precedent for agile, modern trade agreements. The 60-day timeline, while ambitious, reflects a pragmatic approach—building on a decade of groundwork rather than starting anew. A phased implementation, prioritizing services and select goods, could bypass immediate dairy gridlock, with tougher issues deferred to later rounds.

Economic projections are promising. A tenfold trade increase would elevate bilateral flows to levels rivaling New Zealand’s trade with larger partners, while India gains a foothold in the Pacific. Supply chain integration, especially in pharmaceuticals and agriculture, could buffer both nations against global shocks.

Yet, realism vacillations loom. Failure to meet the deadline risks denting momentum, though partial agreements—on services or tourism—could sustain progress. As of March 21, 2025, the clock is ticking, with the first round of talks imminent in April. Success hinges on flexibility, trust, and a shared vision for prosperity.

The India-New Zealand FTA discussions, relaunched in March 2025, embody a confluence of economic ambition and strategic foresight. Bridging a decade-long gap, this partnership promises to unlock vast potential—marrying India’s scale with New Zealand’s efficiency. Challenges, notably dairy and tariffs, test negotiators’ resolve, but the stakes—economic growth, regional stability, and global relevance—justify the effort. As the April 2025 talks near, the world watches whether this 60-day sprint yields a landmark deal or a foundation for future gains. Either way, the India-New Zealand collaboration is poised to redefine bilateral possibilities.

Abhisht Chaturvedi is a Research Analyst at Insights International. His research interests include tech policy, media, and communications.