India-NZ deal to boost exports, services sector

INdia and young sjaelland proclaimed the ratiocination of an challenging and mutually beneficial free trade agreement (FTA) on Monday, with New Delhi securing zero-duty access for all Indian goods in the island country, a $20 billion investment commitment by New Zealand over 15 years, and concessions in professional mobility while shielding its dairy sector.Prime Minister Narendra Modi and his counterpart Christopher Luxon announced the conclusion of the trade deal – the second finalised by India this month after an agreement with Oman – during a telephone conversation. The FTA was concluded nine months after negotiations began during Luxon’s visit to India in March, and both leaders said this reflected the “shared ambition and political will to further deepen ties”.In return, India allowed caliberated market access in 70.03% of tariff lines, covering 95% of New Zealand’s exports to India. While New Zealand would get immediate tariff elimination on 30% of tariff lines such as sheep meat, wool, leather-raw hides, wooden logs and metal scraps. A little more than 35.6% tariff lines, including petroleum oil, malt extract, vegetable oils, and selected electrical and mechanical machinery would see phased duty elimination in three to 10 years. About 4.37% tariff lines such as wine, pharmaceuticals, polymers, aluminium, and steel articles would see tariff reduction. And 0.06% tariff line covering items like honey, apples, kiwi fruit, and albumins would fall under tariff rate quotas (TRQs). TRQ is a trade mechanism that allows import of only a specific quantity of any specified product at a concessional tariff.The deal places 29.97% tariff lines in an exclusion category, covering items such as milk, cream, whey, yoghurt, cheese, animal products (other than sheep meat), and vegetables such as onions, chickpea, peas, corn and almonds.With the strong foundation provided by the FTA, Modi and Luxon “expressed confidence in doubling bilateral trade over the next five years as well as an investment of $20 billion in India from New Zealand over the next 15 years”, the external affairs ministry said in a readout.“An important moment for India-New Zealand relations, with a strong push to bilateral trade and investment,” Modi said on social media. “Concluded in just nine months, this historic milestone reflects a strong political will and shared ambition to deepen economic ties between our two countries.”“The agreement builds on the strong friendship between our two countries. India is one of the fastest-growing economies in the world, and this gives Kiwi businesses access to 1.4 billion Indian consumers,” Luxon said in a post on X. Current bilateral merchandise and services trade between the two countries stood at around $1.3 billion and $1.1 billion, respectively.“Under Prime Minister Modi’s leadership this is the seventh free trade agreement,” Union commerce minister Piyush Goyal said, adding that these FTAs are with complementing economies, having high per capita income. The other six are with Mauritius ( 2021), the UAE (2022), Australia (2022), the EFTA (2024), the UK (July ), and Oman (December ). According to the International Monetary Fund (IMF) data, New Zealand’s per capita income is US$49,380 against India’s US$2,820.The concluded 20 chapters of the India-New Zealand FTA will now undergo “legal scrubbing” that may take some time, commerce secretary Rajesh Agrawal said. The two countries may sign the final draft of the FTA in two-three months, he added.The countries expect to sign the agreement in the first half of 2026, the New Zealand government said. Its operationalisation may take another three-four months.But New Zealand’s parliamentary approval was not immediately assured. New Zealand First, with which the Nationals have a coalition and which holds eight of the 123 seats in parliament, would vote against the deal, ‍said NZ First leader Winston Peters.The coalition has 67 seats, but the Nationals only have 48 and rely on support from coalition partners, including NZ First.The deal “gives too much away, especially on immigration, and does not get enough in return for New Zealanders, including on dairy”, Peters said in a statement.New Zealand’s elimination of duties on 100% of its tariff lines, provides zero duty access for all Indian exports, making Indian labour-intensive sectors such as textiles, apparel, leather, footwear, marine products, gems and jewellery, handicrafts, engineering goods and automobiles globally competitive in that market, the commerce ministry said in a statement.The FTA will also benefit India’s services sector such as IT and IT-enabled services, professional services, education, financial services, tourism, construction and other business services. It has wide scope for business mobility. The FTA also provides improved entry and stay provisions for Indian professionals, and students, including work opportunities during studies, post-study work pathways, dedicated visa arrangements and a working holiday visa framework, the ministry added.The FTA offers temporary skilled employment visas for Indian professionals with a quota of 5,000 at any given time and a stay of up to three years. This pathway covers Indian professions such as AYUSH practitioners, yoga instructors, Indian chefs, and music teachers, as well as professionals in high-demand sectors including IT, engineering, healthcare, education, and construction, strengthening workforce mobility and services trade, the ministry said.Like India’s free trade deal with the four-nation European Free Trade Association (EFTA) bloc, this FTA also has an investment clause. New Zealand has committed to facilitate investments of $20 billion into India over the next 15 years. This will not only boost the Make in India programme but also help New Zealand to use India as a manufacturing base for exporting in third countries, Goyal said. The investment clause is backed by a rebalancing mechanism, giving power to India to suspend FTA benefits to New Zealand, if unfulfilled.Goyal called the FTA, “most comprehensive and forward-looking, reflecting the vision of our two leaders” to take the relationship to “much higher strategic” levels incorporating trade, education, research and development, innovation, tourism, sports and services sector in a very big way. New Zealand is a small but a developed economy with total annual exports of $42 billion and imports of $47 billion.The minister highlighted three significant aspects of the deal. One, it was concluded in a record nine months. Two, it was led by a woman chief negotiator (joint secretary Petal Dhillon). And three, it is India’s FTA with a “Five Eyes” country. The Five Eyes is an intelligence alliance created between Australia, Canada, New Zealand, the UK and the US. India already has agreements with Australia and the UK. Goyal said India and Canada will formally start negotiations for an FTA and New Delhi is “already at an advanced stage” of discussions with the US for a bilateral trade agreement (BTA).Modi and Luxon welcomed progress achieved in other areas of bilateral cooperation, such as sports, education, and people-to-people ties, and reaffirmed their commitment towards strengthening the India-New Zealand partnership.(Rezaul H Laskar in New Delhi and Reuters contributed to this report)