Summary
The India–New Zealand Free Trade Agreement (FTA) negotiations are approaching a major breakthrough, with Commerce Secretary Rajesh Agrawal revealing that talks are nearly complete as of late 2025. The agreement, formally initiated in March 2025, aims to establish a comprehensive economic partnership that enhances trade in goods, services, and investment between the two countries. Although bilateral trade remains modest at USD 1.3 billion in 2024–25, reflecting a 48.6% year-on-year increase, the FTA is strategically significant for India’s broader efforts to diversify its export markets beyond dominant partners like China and the United States.
Negotiations build on earlier efforts dating back to 2010, which stalled in 2015 but have since been revitalized with a focus on reducing trade barriers, regulatory alignment, and sectoral cooperation—particularly in pharmaceuticals, information technology, and engineering goods. New Zealand’s low tariff regime, where over half of tariff lines are duty-free, shifts the emphasis toward non-tariff issues and regulatory transparency. Dairy trade remains a prominent sticking point due to India’s protection of its domestic dairy farmers, making this sector a sensitive and ongoing challenge in the talks.
The FTA also includes key provisions addressing investment protections, digital trade, intellectual property rights, and environmental and labor standards, alongside a unique Treaty of Waitangi exception clause safeguarding New Zealand’s obligations to Māori communities. Both governments, guided by the leadership of Prime Ministers Narendra Modi and Christopher Luxon, have expressed strong commitment to concluding a balanced, mutually beneficial agreement that supports long-term economic and strategic convergence between the two nations.
If finalized early next year as anticipated, the agreement is expected to boost supply chain integration, foster predictable trade environments, and deepen bilateral economic cooperation in line with India’s recalibrated trade diplomacy following its withdrawal from the Regional Comprehensive Economic Partnership (RCEP) in 2019. This pact represents an important milestone in India and New Zealand’s evolving partnership within the Indo-Pacific region.
Background
India and New Zealand initiated discussions on a Comprehensive Economic Cooperation Agreement (CECA) in April 2010, aiming to enhance trade in goods, services, and investment between the two countries. The initial rounds of negotiations progressed with the intent to reduce or eliminate customs duties on a broad range of traded goods and ease norms to promote trade in services and investment. However, after nine rounds of talks, these discussions stalled in 2015.
The formal commencement of negotiations was agreed upon in January 2010, followed by invitations for public submissions to ensure stakeholder engagement. Regular updates and invitations for trade concerns were made available through the Ministry of Foreign Affairs and Trade’s website to maintain transparency and inclusiveness in the negotiation process.
Despite the relatively modest bilateral trade volume, the proposed free trade agreement (FTA) holds strategic significance. It aims not only to diversify India’s export base beyond major partners like China and the United States but also to focus on regulatory alignment and growth in high-value sectors such as pharmaceuticals and information technology services. This effort aligns with India’s broader trade diplomacy recalibration following its withdrawal from the Regional Comprehensive Economic Partnership (RCEP) in 2019, signaling a cautious but focused approach towards trade agreements.
Negotiations have addressed sensitive areas, including dairy products, where differences have narrowed significantly. Officials expect the FTA to be concluded early next year, with key figures such as New Zealand’s negotiator McClay likely to visit India soon to continue discussions. Both sides express commitment to finalizing a balanced, comprehensive, and mutually beneficial agreement reflecting the growing strategic and economic convergence between the two nations.
Overview of the India-New Zealand Free Trade Agreement Negotiations
Negotiations between India and New Zealand on a bilateral Free Trade Agreement (FTA) have been ongoing since the establishment of a Joint Study Group (JSG) in 2007 to assess the feasibility of such an agreement. Formal negotiations commenced in January 2010 with the launch of talks on a Comprehensive Economic Cooperation Agreement (CECA), aimed at enhancing trade in goods, services, and investment. After several rounds of discussions, including nine rounds until 2015, progress stalled, but recent renewed efforts have accelerated the pace of negotiations.
The FTA discussions operate through two parallel tracks: the bilateral India-New Zealand FTA negotiations and the Regional Comprehensive Economic Partnership (RCEP) framework. The agreement aims to achieve balanced outcomes that improve market access, promote supply chain integration, and reduce trade barriers, thereby fostering a predictable and transformative environment for businesses from both countries.
Significant private sector engagement has underpinned the negotiations, focusing on sectoral cooperation to boost economic relations and trade growth. Key areas of regulatory alignment identified include pharmaceuticals, chemicals, auto components, engineering goods, and machinery—sectors expected to benefit the most due to New Zealand’s already low tariffs and transparent regulatory environment. However, dairy trade remains a challenging issue that continues to require careful negotiation.
Merchandise trade between India and New Zealand has seen robust growth, reaching USD 1.3 billion in the financial year 2024–25, a 48.6% increase over the previous year, highlighting the expanding economic partnership and the potential benefits of concluding the FTA. Guided by the shared vision of Prime Minister Narendra Modi and New Zealand Prime Minister Christopher Luxon, both nations have reaffirmed their commitment to deepen bilateral trade, investment, and economic cooperation through this agreement.
Commerce Secretary Rajesh Agrawal has indicated that the negotiations are in an advanced stage and likely to be finalized soon, following multiple rounds of virtual and in-person meetings to bridge remaining differences. The FTA is expected not only to reduce customs duties but also to ease norms that facilitate trade in goods and services, thereby enhancing overall economic integration between India and New Zealand.
Status of Negotiations
Negotiations for a free trade agreement (FTA) between India and New Zealand officially commenced on 16 March 2025, marked by a meeting between India’s Union Minister of Commerce and Industry, Piyush Goyal, and New Zealand’s Minister for Trade and Investment, Todd McClay. Since then, multiple rounds of discussions have been held, both virtually and in-person, aiming to address various facets of trade relations including goods, services, investment, rules of origin, customs procedures, technical barriers to trade, and economic cooperation.
The first round of negotiations took place in May 2025 in New Delhi, followed by the second round from 14 to 25 July 2025, which achieved significant advancements across multiple areas. The third round, held from 15 to 19 September 2025, saw constructive discussions with the conclusion of several chapters and substantial progress in other key domains. The fourth round occurred from 5 to 9 May, focusing on narrowing differences, especially in sensitive areas such as dairy, although discussions around the average margin of preference and tariff line coverage continue.
Commerce Secretary Rajesh Agrawal conveyed optimism about the talks, indicating that the agreement is expected to be finalized soon after the fourth round of negotiations. This progress builds on the shared commitment to deepen economic ties, reinforced by guidance from Prime Minister Narendra Modi during New Zealand Prime Minister Christopher Luxon’s visit in March 2025. Officials anticipate that the FTA will be concluded early next year, with New Zealand’s Minister Todd McClay likely to visit India to continue the dialogue.
India’s bilateral merchandise trade with New Zealand recorded a notable increase of nearly 49 percent in FY 2024–25, reaching USD 1.3 billion, underscoring the growing economic convergence between the two countries and the importance of the ongoing negotiations. Stakeholders are invited to submit concerns to negotiators, with regular updates posted on the Ministry of Foreign Affairs and Trade’s website to maintain transparency throughout the negotiation process.
Provisions and Key Components of the FTA
The proposed Free Trade Agreement (FTA) between India and New Zealand aims to be a comprehensive and commercially meaningful agreement that eliminates as many barriers as possible across all goods and services sectors by an agreed deadline. Key components under negotiation include market access for goods and services, investment protections, competition policy, intellectual property rights, digital trade including paperless procedures, government procurement, labour standards, environmental safeguards, and gender considerations.
Given New Zealand’s relatively open tariff regime—with an average import duty of 2.3% and over 58% of tariff lines already duty-free—the FTA is expected to focus less on tariff reductions by New Zealand and more on regulatory alignment and transparency, especially in sectors such as pharmaceuticals, chemicals, auto components, engineering goods, and machinery. The agreement seeks to address behind-the-border barriers that hinder trade, recognizing that Indian goods already face minimal border taxes in New Zealand, which creates an asymmetry in tariff concessions.
Investment provisions are also a crucial part of the negotiations. The New Zealand International Business Forum (NZIBF) supports raising investment screening thresholds for India to align with those granted to other FTA partners and emphasizes the importance of protections for foreign investment while respecting New Zealand’s right to regulate in the public interest. Although the New Zealand Government opposes the inclusion of Investor-State Dispute Settlement (ISDS) mechanisms in FTAs, it acknowledges the value of robust investment protections.
An essential and distinctive component of the FTA is the inclusion of a Treaty of Waitangi exception clause, which would protect New Zealand’s ability to uphold its obligations to Māori under the Treaty of Waitangi. This provision safeguards the Crown’s right to regulate in the national interest, ensuring that Māori interests in sectors such as agriculture, forestry, and fisheries are not adversely affected by tariff eliminations. Such a clause has been sought in line with other New Zealand FTAs.
Furthermore, the FTA encompasses broader regulatory and cooperation frameworks, covering competition policy, intellectual property protection, trade remedies, labour rights, environmental commitments, and economic and technical cooperation. These provisions aim to promote regulatory coherence and good regulatory practice, thereby strengthening the bilateral relationship beyond mere tariff reductions.
Sectoral Focus and Priorities
The ongoing negotiations between India and New Zealand for a comprehensive Free Trade Agreement (FTA) are centered around addressing both tariff and non-tariff barriers to enhance bilateral trade and investment. A key emphasis is placed on sectoral cooperation to enable sustainable growth and expand market access for goods and services from both countries. New Zealand seeks commercially meaningful outcomes that remove tariffs and regulatory obstacles across a wide range of its key sectors, aiming to increase exports and investment opportunities.
India’s exports to New Zealand predominantly include clothing, fabrics, home textiles, pharmaceuticals, medical supplies, refined petroleum products, agricultural equipment such as tractors and irrigation tools, auto components, iron and steel, paper products, electronics, shrimps, diamonds, and basmati rice. Conversely, New Zealand’s main exports to India consist of agricultural goods, minerals, apples, kiwifruit, meat products including lamb and mutton, milk albumin, lactose syrup, coking coal, logs and sawn timber, wool, and scrap metals. The focus on these sectors underscores the complementary nature of the two economies and the potential to deepen trade ties.
While dairy remains a sensitive issue—India imports minimal dairy from New Zealand due to protection of its domestic sector, which supports around 70 million small farmers—regulatory alignment in other sectors offers significant opportunities. Key areas such as pharmaceuticals, chemicals, auto components, engineering goods, and machinery stand to benefit due to New Zealand’s low tariffs and high regulatory transparency. The challenge lies primarily in behind-the-border regulatory barriers rather than tariffs themselves.
In addition to goods, the FTA negotiations cover services, investment, economic and technical cooperation, intellectual property, competition, and dispute settlement mechanisms. Working groups have been established to address these areas, reflecting the comprehensive nature of the agreement under discussion. Investment flows from India into New Zealand span sectors like technology, banking, consultancy, and education, highlighting the multifaceted nature of economic engagement beyond trade in goods.
Both countries recognize sectors such as agriculture, maritime cooperation, aerospace, and defense as areas with substantial collaboration potential, aligning with their strategic priorities. The focus on fairness and balance in the negotiations aims to create a predictable and transformative trading environment, which will ultimately strengthen supply chain resilience and promote investment linkages.
Economic Impact and Benefits
The India-New Zealand Free Trade Agreement (FTA) is poised to significantly enhance economic ties between the two nations by elevating trade and investment potential. In the financial year 2024–25, merchandise trade between India and New Zealand reached an impressive USD 1.3 billion, marking a robust year-on-year growth of 48.6%, which highlights the growing potential of their economic partnership even prior to the agreement’s finalization. The FTA aims to further improve supply chain integration, reduce trade barriers, and create a predictable and transformative trading environment for businesses on both sides, thereby facilitating sustained growth in bilateral commerce.
India’s strategy to diversify its trade partnerships beyond dominant markets such as the US and China finds a complementary fit in New Zealand. Despite the absence of a finalized FTA, bilateral trade has expanded rapidly, indicating the strategic importance of New Zealand as a stable, high-value partner within the Indo-Pacific region. The agreement is not merely about increasing trade volumes but also about establishing a clear direction for India’s broader economic diversification and strengthening sectoral cooperation through a business-led approach.
The ongoing negotiations reflect a shared commitment from both governments to conclude a balanced and mutually beneficial agreement that addresses both tariff and non-tariff barriers. This approach is expected to unlock new opportunities for exporters and investors, ultimately deepening bilateral trade, investment, and economic cooperation under the visionary leadership of Prime Ministers Narendra Modi and Christopher Luxon. The comprehensive nature of the FTA will cover various areas including trade in goods and services, rules of origin, sanitary and phytosanitary measures, and technical barriers to trade, fostering a holistic enhancement of economic relations between India and New Zealand.
Challenges and Potential Areas of Concern
One of the primary challenges in the India-New Zealand Free Trade Agreement (FTA) negotiations is the significant asymmetry in tariff structures between the two countries. New Zealand maintains an average tariff rate of only 2.3%, with over 58% of its tariff lines already duty-free, which means Indian goods currently face minimal border taxes in New Zealand. Consequently, India would be required to make most of the tariff concessions, while New Zealand’s obligations on tariff reduction would be limited. This imbalance has shifted the focus of potential benefits for India away from tariff cuts toward regulatory alignment, particularly in sectors such as pharmaceuticals, chemicals, auto components, engineering goods, and machinery, where New Zealand’s regulatory transparency could facilitate smoother trade.
A significant sticking point remains the dairy sector, often described as the “dairy elephant” in India–New Zealand trade discussions. Dairy has long been a sensitive and complex issue, given New Zealand’s strong dairy industry and India’s protective measures for its domestic dairy farmers. This sector continues to pose difficulties in reaching a mutually acceptable framework within the FTA negotiations.
Beyond tariffs and sector-specific challenges, the FTA must also address a broad range of issues that are vital to both countries. These include market access for goods and services, investment, competition policy, intellectual property rights, digital trade (including paperless trade), government procurement, labor standards, environmental protections, and gender considerations. Additionally, New Zealand emphasizes the importance of safeguarding the provisions of the Treaty of Waitangi and maintaining the right to regulate in the national interest.
These complexities underscore the need for comprehensive and nuanced negotiations that go beyond traditional trade concerns. Ensuring regulatory compatibility and addressing non-tariff barriers are crucial for unlocking the full potential of the partnership, especially given the existing tariff disparities. The FTA aims to foster a predictable and transformative trading environment that balances these concerns while enhancing economic cooperation.
Strategic Importance and Alignment
The ongoing negotiations for a free trade agreement (FTA) between India and New Zealand reflect a strategic
Future Outlook
The future outlook for the India–New Zealand Free Trade Agreement (FTA) is optimistic, with both countries expressing strong commitment to concluding a balanced, comprehensive, and mutually beneficial pact in the near term. Officials anticipate that the FTA negotiations, which formally commenced in March 2025 and have seen accelerated progress through a mix of virtual and in-person talks, will be concluded early next year. Recent engagements, including New Zealand Trade Minister Todd McClay’s visit to India, have helped bridge remaining differences, particularly in sensitive sectors such as dairy.
This FTA holds significance beyond its immediate economic impact, as bilateral merchandise trade between the two countries stood at $1.3 billion in 2024-25, marking a nearly 49% growth over the previous year. While the pact is not volume-driven, it aims to diversify India’s export base away from traditional markets like China and the US by focusing on regulatory alignment and high-value sectors such as pharmaceuticals and IT services. The agreement also symbolizes a strategic recalibration of India’s trade diplomacy after its 2019 withdrawal from the Regional Comprehensive Economic Partnership (RCEP), signaling renewed engagement with Pacific economies.
Both nations, guided by the leadership of Prime Minister Narendra Modi and New Zealand Prime Minister Christopher Luxon, have reaffirmed their resolve to deepen bilateral trade, investment, and economic cooperation through this agreement. The anticipated FTA is expected to enhance trade and investment potential, improve supply chain integration, and foster a predictable trading environment conducive to business growth on both sides.
The content is provided by Avery Redwood, The True Signal
