0% duty on 100% exports: India secures trade deal with New Zealand

Wellington commits to $20 bn FDI in 15 years; dairy items excluded

India and New Zealand on Monday announced the conclusion of talks on a free-trade agreement (FTA), under which Wellington will grant zero-duty access to 100 per cent of Indian exports and commit $20 billion in foreign direct investment (FDI) over the next 15 years.

 

India, in return, has offered liberalised duties across 70 per cent of tariff lines, covering 95 per cent of New Zealand’s exports to India in value terms. Duties will be eliminated immediately on 30 per cent of tariff lines once the agreement comes into force, including products such as wood, wool and sheep meat.

 

As much as 29.97 per cent of tariff lines are on the exclusion list, reflecting India’s sensitivities. These include dairy products such as milk, cream, whey, yoghurt and cheese; animal products other than sheep meat; vegetables including onions, chana, peas and corn; as well as almonds, sugar, artificial honey and other items.

 

Wellington was keen on duty reduction and greater market access in the dairy space but New Delhi insisted on the sector’s exclusion from the deal. A clause, however, allows New Zealand to seek consultations if India were to open its dairy market to countries such as Australia or Chile. Indian officials reiterated that the government would continue to protect the domestic dairy sector. 

 

Once the FTA takes effect, India’s average tariff on New Zealand imports will fall to 13.18 per cent, declining further to 10.3 per cent in five years and 9.06 per cent by the 10th year. India’s simple average tariff on a most-favoured nation basis currently stands at 16.2 per cent.

 

 “The India–New Zealand partnership is going to scale newer heights. The FTA sets the stage for doubling bilateral trade in the coming five years,” Prime Minister Narendra Modi said in a post on X. India, he added, welcomed more than $20 billion in investment from New Zealand across sectors, underpinned by its young workforce, startup ecosystem and reform-driven economy. Modi said he had spoken with his “friend” Prime Minister Christopher Luxon following the conclusion of the “landmark” agreement.

 

Negotiated over nine months, the FTA is expected to double the current $2.4 billion bilateral trade in goods and services within five years.

 

The agreement is likely to be signed within the next two-three months, following legal scrubbing of the text. As parliamentary approval will be required in New Zealand, officials expect the FTA to come into force within six-seven months.

 

Once signed, the pact will become India’s seventh trade agreement since 2021, reflecting New Delhi’s strategy of diversifying trade ties at a time of global realignment driven by Washington’s protectionist tariff policies. Commerce and Industry Minister Piyush Goyal said it was India’s third trade deal with a “Five Eyes” country, after agreements with Australia and the UK, with talks with Canada set to begin soon. A trade deal is also awaited with the US, one of the nations of the Five Eyes.

 

Officials said the agreement would help Indian companies gain a foothold not just in New Zealand but across the Pacific island economies, while also positioning India as a key supplier of skilled and semi-skilled labour. Commerce Secretary Rajesh Agrawal said India was increasingly focusing on FTAs with developed economies, where trade structures are more complementary.

 

 According to the commerce department, the agreement contains India’s most ambitious services offer to date. It removes numerical caps on Indian students, guarantees at least 20 hours of work per week during study, and extends post-study work opportunities of up to three years for STEM graduates and four years for doctoral degree holders, creating clearer pathways for skills development and international careers. 

 

A new Temporary Employment Entry visa pathway will allow up to 5,000 Indian professionals at any given time to work in New Zealand for up to three years. The scheme covers occupations such as AYUSH practitioners, yoga instructors, Indian chefs and music teachers, alongside high-demand sectors including IT, engineering, healthcare, education and construction. New Zealand will also issue multiple-entry working holiday visas to 1,000 young Indians each year, valid for 12 months. Market access commitments have been made across around 118 services sectors.

 

On goods, New Zealand’s average applied tariff of 2.2 per cent in 2025 will be reduced to zero. Indian exporters in sectors such as textiles, apparel, leather and headgear, ceramics, carpets, automobiles and auto components are expected to benefit significantly, as New Zealand had maintained duties of up to 10 per cent in these categories.

 

For products such as wine, lamb and wool, India has mirrored the concessions it offered under its interim trade pact with Australia. Tariff-rate quotas, minimum import prices and seasonal market access arrangements have been extended to items including manuka honey, kiwifruit, apples and albumins, including milk albumins.

 

New Zealand’s $20 billion investment commitment will be backed by a “rebalancing mechanism”, allowing India to suspend FTA benefits if the promised investment does not materialise within 15 years. The provision mirrors safeguards in India’s trade agreement with the European Free Trade Association (EFTA) countries.

 

New Zealand’s cumulative FDI into India stood at about $88.24 million between January 2000 and September 2025, with interest emerging in manufacturing and infrastructure-linked sectors.

 

Ajay Srivastava, a former trade ministry official and founder of the Global Trade Research Initiative, said the agreement was less a trade breakthrough than a framework for deeper cooperation. “Its real impact will depend on how both countries use it to strengthen practical economic links,” he said, adding that this would require building supply chains, expanding services trade, deepening education and skills partnerships, and leveraging diaspora and mobility provisions.

 

Bilateral merchandise trade reached $1.3 billion in FY25, while total trade in goods and services stood at around $2.4 billion in 2024, with services accounting for $1.24 billion. India’s main exports include aviation turbine fuel, textiles, pharmaceuticals, machinery and petroleum products, while imports from New Zealand comprise wood, steel and aluminium scrap, coking coal, turbojets and agricultural and animal-based products such as shorn wool, milk albumins, apples and kiwifruit.