What exactly will New Zealand’s free trade deal with India mean?

Source: Radio New Zealand

Explainer – Trade Minister Todd McClay and his Indian counterpart, Piyush Goyal, announced the recommencement of free trade negotiations as part of Prime Minister Christopher Luxon’s trip to the South Asian nation in March last year.

Nine months later, shortly before Christmas, the government said the trade negotiations had been concluded, achieving significant wins for several industries but limited gains for dairy.

Indeed, both sides have described the free trade agreement (FTA) as a shot in the arm for their respective economies.

The Indian government said the trade deal was a “forward-looking partnership” that promised to give labour-intensive sectors such as textiles and leather a significant boost.

For New Zealand, the agreement provided new business opportunities through enhanced access for the first time to a rapidly growing Indian middle class – expected to exceed 700 million within five years.

McClay even called the deal a “once-in-a-generation” achievement.

Below is a deeper look at what has been negotiated and announced to date.

First things first. What’s the current status of the New Zealand-India free trade agreement?

The concluded negotiations of the proposed FTA will become a ratified treaty after enabling legislation is passed by New Zealand and India parliaments.

The passing of such legislation is relatively straightforward in India, where Prime Minister Narendra Modi leads a coalition government that is united on the deal.

The path is less clear in New Zealand, after a coalition member has expressed its opposition to the agreement.

New Zealand First has invoked an “agree to disagree” clause of its coalition agreement with the National Party, with leader Winston Peters calling the deal “neither free nor fair”.

As a result, the government will need support from the opposition to make the trade deal with India a reality.

If one of the opposition parties does support the deal, National would seek to pass enabling legislation as soon as possible with an eye on the general election that must be held by the year’s end.

Once both nations have done so, the agreement could be signed sometime in the first half of the year.

Both sides have also agreed to review the agreement one year after it comes into force, which provides a mechanism to pursue further improvements in future, according to McClay.

What has been the reaction to the deal so far?

Overwhelmingly positive.

Export NZ, the NZ Forest Owners Association, the Meat Industry Association, Beef + Lamb NZ, Horticulture NZ, NZ Timber Industry Federation, Wools of NZ, have all expressed support for the deal.

The Dairy Companies Association recognised the deal was good for the country but not for dairy, with core products such as butter and cheese being left out.

However, the association welcomed the inclusion of duty-free re-exports that would see New Zealand export ingredients to India for manufacture.

ExportNZ highlighted existing prohibitive tariff barriers – typically 30-60 percent and up to 150 percent for wine – the trade deal would bring down, giving New Zealand exporters more certainty and options.

The Meat Industry Association described the deal as a “strategically significant milestone” for the country’s red meat sector.

New Zealand Forest Owners Association believed the deal would provide a platform to lift forestry export volumes over time and grow higher-value trade in processed wood and building products.

Beef + Lamb New Zealand said the announcement was positive for sheep farmers, putting the country on a level playing field with Australia.

Horticulture New Zealand said improved access to India would further diversify horticulture’s export portfolio.

The NZ Timber Industry Federation also welcomed news of the agreement, saying it created “huge opportunities” for saw-millers and wood processors nationwide.

Since the announcement before Christmas, several media commentators have also expressed their support in the deal.

New Zealand Herald business commentator Fran O’Sullivan said the free trade agreement “could reshape our exports – and our politics”.

Meanwhile, Stuff political editor Luke Malpass described the deal as “1.4 billion reasons to cheer”.

Let’s talk trade numbers

Total two-way trade between New Zealand and India, which is forecast to become the world’s third-largest economy by around 2030, was valued at $3.68 billion in the year to June 2025.

Of this, New Zealand exported goods and services valued at $1.79 billion to India over that period.

This makes India the country’s 21st-largest goods export market and fifth-largest services export market.

New Zealand’s key exports to India in year ending June 2025 were travel services ($948 million), industrial products ($265 million), forestry and forestry products ($134 million, of which logs constituted $77 million), horticulture ($118 million, of which apples were $79 million and kiwifruit $36 million), dairy and dairy products ($76 million, of which albumins was $62 million) and wool ($76 million).

While travel is the largest services export between the two countries, other key services exports from New Zealand to India include education and government services.

Key Indian imports in New Zealand in 2024 included machinery and equipment ($174 million), textiles and apparel ($147 million), pharmaceuticals ($131 million), vehicles ($62 million), precious stones and metals ($60 million) and paper products ($44 million).

What did New Zealand and India agree on in terms of tariffs in the negotiations?

The free trade agreement eliminates duty on 100 percent of Indian imports (8284 tariff lines), while 95 percent of New Zealand’s current exports will be tariff-free or benefit from reduced tariffs.

According to the Indian government, New Zealand has generally maintained tariffs of around 10 percent for around 450 lines of key Indian exports, with the average applied tariff being 2.2 percent in 2025. The tariffs are expected to be zero from day one of the agreement coming into force.

India’s labour-intensive sectors – textiles, clothing, leather and footwear – as well as automotive companies are poised to benefit significantly from this.

Meanwhile, the average tariff applied to New Zealand’s current exports to India will decrease to 3 percent.

Tariffs have been eliminated from almost all forestry products, wool, sheep meat and coal.

Current tariffs for forestry products to India range between 5.5 and 11 percent, while current tariffs on sheep meat exports are 33 percent.

What’s more, the current 33 percent tariff applied to fish and seafood exports will be eliminated on most goods over seven years.

Most of New Zealand’s existing trade in industrial products with India will be tariff-free within 10 years.

The current 33 percent tariff placed on cherries and avocados will be eliminated over 10 years.

According to the Indian government, New Zealand has agreed on focused action plans for kiwifruit, apples and honey to improve productivity, quality and sectoral capabilities of these fruit growers in India.

For this, centres of excellence will be established, which will work on capacity building for growers, provide technical support for orchard management and impart knowledge on post-harvest practices, supply chains and food safety.

In return, there will be paired market access for New Zealand exporters managed through a tariff rate quota system with minimum import prices and seasonal imports.

The current 66 percent tariff on mānuka honey exports will be cut by 75 percent over five years to 16.5 percent.

For apples, the current 50 percent tariff will reduce to 25 percent for 32,500 tonnes from day one, growing to 45,000 tonnes over six years.

For kiwifruit, the current 33 percent tariff is eliminated for 6250 tonnes from day one, growing to 15,000 tonnes over six years.

In addition, there will be a 50 percent tariff reduction on kiwifruit exports exceeding the quota to 16.5 percent as soon as the trade agreement is in place.

There is good news for New Zealand wine exporters as well, which currently face a tariff of 150 percent.

Tariffs on wine exports will be reduced by 66-83 percent over 10 years from the date the agreement comes into force, ultimately ending on a tariff of 25-50 percent and levelling the playing field with India’s existing FTA partners.

There is also a commitment by India that any better outcome for wine exporters offered in the future to any other country will automatically be extended to New Zealand.

According to the Indian government, it has offered New Zealand market access in about 70 percent of the tariff lines, while keeping almost 30 percent in exclusion.

As expected, exclusions include dairy (milk, cream, whey, yoghurt, cheese, etc), animal products (other than sheep meat) and vegetable products.

That said, the current 33 percent tariff placed on bulk infant formula and other dairy-based food preparations and the 22 percent tariff placed on peptones (a dairy-based product) will be phased out over seven years.

The free trade agreement also creates a new quota of 3000 tonnes for albumins (a milk protein product), which is above recent average export volumes to India. The 22 percent tariff will be halved on exports within the quota.

Finally, there is a commitment in the agreement that India could increase New Zealand access to dairy if the South Asian nation offered improved access to “comparable countries” – that is, similar per capita GDP, economic size and dairy production levels – in future.

However, Goyal told reporters that “India [is] never going to open up dairy” to any nation when announcing the conclusion of trade talks with New Zealand in December.

What about delays at the border and customs?

According to the government, the free trade agreement aims to streamline customs processes at the border, reduce transaction costs, increase transparency, cut red tape and provide greater certainty to New Zealand exporters.

“India Customs will release all goods within 48 hours, and, in the case of perishable goods and express consignments, endeavour to release within 24 hours,” the Ministry of Foreign Affairs and Trade said.

“The FTA codifies access to, and procedures around, advance rulings and a single window for customs clearance import procedures, as well as codifying the ability for traders to submit customs import documentation to India electronically.

“New Zealand exporters will have a choice of the type of proof of origin they can use, either a certificate of origin or self-declaration for approved exporters.”

What other commitments has New Zealand made?

New Zealand has made a commitment to promote investment into India, with the aim of increasing private sector investment by US$20 billion (NZ$34 billion) over 15 years.

To facilitate New Zealand investments, India will establish a bespoke New Zealand Investment Desk to assist New Zealand investors with issues that may arise across the investment lifecycle.

According to the Indian government, a rebalancing clause is in place in the trade agreement “enabling India to take remedial measures should delivery on investment be below commitment levels”.

What about healthcare, pharmaceuticals or traditional medicines?

According to the Indian government, the free trade agreement boosts India’s pharmaceuticals and medical devices sector by making provision for faster regulatory access.

“The FTA streamlines access for pharmaceuticals and medical devices by enabling acceptance of GMP and GCP inspection reports from comparable regulators, including approvals by the US FDA, EMA, UK MHRA, Health Canada and other comparable regulators,” the Indian government said.

“These will reduce duplicative inspections, lower compliance costs and expedite product approvals, thereby facilitating smoother market access and supporting growth of India’s pharmaceutical and medical devices exports to New Zealand.”

In addition, the Indian government says, New Zealand has signed an annex in the agreement to facilitate trade in Ayurveda, yoga and other traditional medicine services with India.

“It gives centre stage to India’s AYUSH disciplines (Ayurveda, yoga and naturopathy, Unani, Sowa-Rigpa, Siddha and homeopathy) alongside Māori health practices,” the government said.

Ayurveda is a traditional form of medicine based around herbs and massage that is popular with the Indian community in New Zealand.

But, as Medsafe has told RNZ in the past, “there are no approved Ayurvedic medicines in New Zealand”.

New Zealand’s health agency does not directly regulate Ayurvedic practitioners or their practices and routinely publishes reports around concerns on products such as Ayurvedic medicines on its website to keep the public and health practitioners informed.

Any other regulatory provisions worth highlighting?

According to the Indian government, there’s a binding commitment in the free trade agreement from New Zealand to amend its laws within 18 months to provide EU-level protection for India’s geographical indications (GIs).

“The current GI Law of New Zealand only allows for India’s wines and spirits to be registered,” the Indian government said.

“Commitment is now in place to taking all steps necessary including amendment of its law to facilitate the registration of India’s wines, spirits and ‘other goods’, a benefit that was accorded to the EU by New Zealand,” it said.

“Timelines for this are 18 months from agreement entering into force.”

The Ministry of Foreign Affairs and Trade noted this in its summary of the agreement.

“New Zealand agreed to undertake a review of GI protections with a view to matching protections we agreed with the European Union, including to allow for protections of individual GI names,” the summary said.

“That process will start when the agreement is signed, and we will seek public input.”

On immigration, what has been included in the free trade agreement?

In a nutshell, the agreement includes enhanced provisions for student mobility, post-study opportunities, skilled employment pathways and working holiday visas in the negotiated deal.

Accordingly, 1000 Indians aged 18 to 30 years old will be granted multiple-entry 12-month working holiday visas each year, giving them an opportunity for global exposure, skills acquisition and people-to-people linkages.

In addition, eligible Indian students graduating from a New Zealand institution will be eligible for a post-study work visa, ranging from two years for a bachelors’ degree, three years for STEM bachelors and masters, and four years for doctorates.

The free trade agreement codifies the right for Indian students to work for up to 20 hours a week (within the current domestic policy of up to 25 hours).

The trade deal also simplifies entry arrangements for Indian service providers and professionals for short periods of stay, according to the Ministry of Foreign Affairs and Trade.

“This includes an equivalent of 1667 temporary employment entry (TEE) visas per year for a number of occupations where New Zealand has a skills shortage such as certain ICT fields, engineering and specialised health services, as well as certain iconic Indian professions such as Ayush (Indian traditional medicine) practitioners, music teachers, chefs and yoga instructors,” the ministry said.

“These TEE visas are for three years and the total number available under the commitment is capped at no more than 5000 at any one time over that three-year period.”

The ministry did not anticipate this to prompt a surge in applications.

“This [1667 TEEs per year] represents less than 6 percent of the current average total number of skilled visas issued to Indian nationals each year by New Zealand,” the ministry said.

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand