Subject: IR

Topic: India-New Zealand FTA

Context

• Announcement Date: December 22, 2025.

• Signatories: Indian PM Narendra Modi and New Zealand PM Christopher Luxon.

• Significance: This fast-tracked agreement (concluded in nine months) follows India's FTAs with the UK and Oman, signalling India's growing confidence as a reliable global economic partner.

 

​Key Features of the Agreement

• Complementarity: The deal leverages India's comparative advantage in services and labour mobility.

• Market Access:

  • New Zealand: Agreed to eliminate duties on 100% of its tariff lines, granting duty-free access to all Indian exports.

  • India: Offered market access on 70% of its tariff lines.

• Investment: New Zealand has committed to investing $20 billion in India over 15 years.

 

Sector-Specific Impact

• Goods:

  • India's Gains: Benefit to labour-intensive sectors like textiles, apparel, leather, pharma, and engineering goods.

  • Manufacturing Boost: Duty-free intermediate inputs (wooden logs, coking coal, metal waste) will lower manufacturing costs for Indian industries.

  • Agriculture:

    • Cooperation: Focus on apples, kiwifruit, and honey.

    • Exclusions (Red Lines): To protect livelihoods, no duty concessions were made for dairy, sugar, spices, and edible oils.

• Services & Mobility (Major Focus):

  • Widest Access: New Zealand offers its widest service access so far in sectors like IT, fintech, education, telecom, and construction.

  • Professionals: Mobility provisions for skilled workers in engineering, healthcare, and education will make India a key supplier of the global workforce.

 

Strategic & Geopolitical Significance

• RCEP Milestone: With this deal, India has concluded economic partnership agreements with all Regional Comprehensive Economic Partnership (RCEP) members, except China.

• Global Integration: It positions India as a hub for global value chains (GVCs), aiming for the $7 trillion economy goal by 2030.

Challenges & Way Forward

• Utilization Rates: Historically, India's FTA utilization rate is low (~25%) compared to developed economies (70-80%) due to awareness gaps and non-tariff barriers.

• Recommendation: The Confederation of Indian Industry (CII) suggests expanding beyond tariffs to deepen skills, education linkages, and regulatory cooperation to fully utilize the pact.

• Himachal apple growers oppose reduced import duty on New Zealand: Centre’s proposal to slash the import duty on New Zealand apples from 50% to 25%. 

"The RCEP Minus China Strategy" The conclusion of the India-New Zealand FTA effectively completes India's strategy of securing the benefits of the RCEP bloc without the associated risks of a trade deficit with China. By signing bilateral deals with all RCEP members individually (like Australia, Japan, South Korea, ASEAN nations, and now New Zealand), India has created a "de facto" trade bloc that excludes China, allowing it to protect domestic manufacturing while enjoying preferential access to the rest of the Asia-Pacific region.