India-New Zealand FTA: A strategic victory for both the economies

India’s recent spate of trade agreements with strategic partners underlines the renewed momentum in India’s trade diplomacy and the leadership’s resolve to integrate India more deeply with global markets. Free trade agreements can be a quick lever to market diversification but the gains that accrue can be long term. Four major Free Trade Agreements (FTA) have either been implemented, signed, or successfully concluded over the course of this year, and all of them are progressive, going much beyond tariff liberalisation.

 

India’s FTA with New Zealand that was concluded this Monday is amongst the forward-looking pact that goes beyond trade in goods and entails significant gains through investment, services, mobility, regulatory arrangements and innovative mechanisms.

 

Coming close on the heels of the Trade and Economic Partnership Agreement (TEPA) with EFTA, the India–New Zealand FTA embeds investment commitments within the agreement itself. New Zealand has committed to facilitating long-term investments of $ 20 billion in India over a 15-year period, directed towards manufacturing, infrastructure, innovation, and job creation. The potential to collaborate and promote investments in high-value sectors such as renewable energy, digital services, and modern infrastructure align with India’s growth and development priorities. 

 

On market access too, the FTA provides potential market expansion opportunities for Indian exporters. New Zealand has offered 100 per cent duty-free access across all tariff lines, thus making Indian products competitive in the New Zealand market. The sectors expected to gain most include labour intensive sectors like textiles and apparel, leather goods, ceramics, carpets. By removing tariffs on all Indian exports, the FTA directly supports workers, artisans, women entrepreneurs, youth, and MSMEs, thus enabling their deeper integration into global value chains.

 

The agreement also provides a major boost to India’s pharmaceutical and medical devices sectors through faster and more predictable regulatory access. New Zealand will accept Good Manufacturing Practice (GMP) and Good Clinical Practice (GCP) inspection reports from comparable regulators in other advanced countries. This will reduce duplicative inspections, lower compliance costs, and expedite product approvals, thus facilitating smoother market entry and supporting the growth of India’s pharma and medical device exports.

 

India too has opened nearly 70 per cen of its tariff lines to New Zealand exporters but has preserved the balance by ensuring that sensitive sectors remain excluded from tariff reductions, particularly dairy and key agricultural products.

 

An innovative feature of the FTA lies in agriculture cooperation. New Zealand will deliver Agriculture Productivity Action Plans for kiwifruit, apples, and honey, aimed at improving productivity, quality, and sectoral capabilities. The cooperation includes Centres of Excellence, improved planting material, capacity building, collaborative research, and technical support across orchard management, post-harvest practices, supply chains, and food safety. For Indian agriculture, these initiatives if effectively implemented can raise yields, quality standards, and farmers’ incomes. 

 

Perhaps the most transformative gains lie in services and mobility. The India-New Zealand FTA secures market access commitments in about 118 services sectors, spanning computer-related services, professional services, telecommunications, construction, education, financial services, tourism, and more, alongside Most-Favoured-Nation commitments in 139 sub-sectors. For India, this opens yet another avenue for diversification in services exports.

 

Mobility provisions are unprecedented. For the first time, New Zealand has created a dedicated pathway on student mobility and post-study work visas with India. Numerical caps on Indian students are removed, with guaranteed work rights during study and extended post-study work options. The FTA also creates a new Temporary Employment Entry visa for 5,000 Indian professionals, including AYUSH practitioners, yoga instructors, Indian chefs, music teachers besides those in IT, engineering, healthcare, education, and construction. The agreement also provides for enhanced youth mobility through multiple entry Working Holiday Visas for 1,000 young Indians annually.

 

Bilateral trade between India and New Zealand may currently be modest - around $2.4 billion, but the potential is substantial. With expanded cooperation, investment, and services trade, doubling bilateral trade by 2030 is a realistic ambition. 

 

New Zealand’s total import market is worth nearly $47 billion for merchandise and $24 billion for services, and India’s current market share here is mere 1.6 per cent and 2.6 per cent, respectively. In-fact, IT and computer services account for nearly 11.5 per cent of New Zealand’s total services imports and India’s share therein is just 5.3 per cent, clearly indicating a huge potential for expansion post the FTA. Other business services such as professional and management consulting, and Technical, and trade related services also offer significant opportunities. These account for almost 17 per cent of New Zealand’s total services imports and India has a mere 2.4 per cent share in this market.

 

 The two sides have concluded the agreement in a short span of 9 months and is expected to be signed soon. Clearly, the government has laid out an array of opportunities for Indian industry to seize and if utilised well, the India–New Zealand FTA will strengthen trade, investments and economic relations between the two countries.

 

(The author is Director General, FICCI)  (Disclaimer: These are the personal opinions of the writer. They do not reflect the views of www.business-standard.com or the Business Standard newspaper)