New Zealand & India Sign Historic Trade Agreement

New Zealand's Trade and Investment Minister Todd McClay will put pen to paper in New Delhi today, formally signing a free trade agreement with India that the Government is describing as one of the most significant trade deals in New Zealand history.

McClay has travelled to New Delhi with a delegation including MPs from several parties and more than 30 business representatives, for a signing ceremony that caps years of intensive negotiations - McClay visited India seven times as part of efforts to secure the deal since the coalition took office - and today's signing fulfils a public commitment made by  Prime Minister Christopher Luxon during a televised debate in 2023.

The agreement unlocks preferential access to one of the world's fastest-growing economies. India is projected to become the world's third-largest economy, with a middle class expected to reach 715 million people by 2030 — a consumer base larger than the entire population of the European Union. Despite India's enormous scale, it is currently only New Zealand's 12th-largest export market, with two-way trade sitting at NZ$3.68 billion annually. The FTA is designed to change that dramatically, supporting the Government's stated goal of doubling the value of New Zealand's exports within a decade.

Under the deal, 95% of New Zealand's current exports to India will either become tariff-free or benefit from sharply reduced tariffs. More than half will gain full tariff exemption  immediately, rising to over 80% once fully phased in. The average tariff on New Zealand exports will drop to just 3%, down from rates that have often ranged between 30% and 60% — and as high as 150% for wine. Estimated tariff savings on day one alone are calculated at NZ$43 million, growing to NZ$62 million based on current trade volumes, with further gains expected as business relationships deepen and India's economy continues to expand.

Key sectors of the NZ economy stand to benefit immediately. The 33% tariff on sheep meat will be gone on day one, as will tariffs on wool and coal. Forestry — already New Zealand's second-largest goods export to India at NZ$399 million annually — will see over 95% of exports enter India tariff-free from day one, with almost all remaining forestry exports phased to zero over seven years. Fish and seafood tariffs will follow the same seven-year phasing to zero.

NZ PM Luxon meets Indian leader Modi on a recent visit/image AMC

New Zealand has become the first country to secure preferential apple access in any Indian free trade agreement, alongside valuable quota access for kiwifruit — including duty-free access within quota and a 50% tariff reduction outside it, volumes that exceed recent average trade levels and are set to grow further. Phased tariff elimination is also secured for cherries, avocados, blueberries, and persimmons.

Mānuka honey tariffs will be cut by 75% over five years — the first time India has granted preferential access for honey in any trade deal — opening up significant room for growth from a current export base of just seven tonnes per year.

Wine exporters will see tariffs slashed by 66-83% over ten years from the current eye-watering starting point of 150%, bringing New Zealand into line with existing Indian FTA partners. A future-proofing clause ensures any better deal India offers a future FTA partner will automatically be extended to New Zealand. The same automatic extension applies to services, where fintech, tertiary education, environmental services, and professional services firms.

On dairy — long the most sensitive point in negotiations — the agreement falls short of full liberalisation but delivers meaningful incremental gains. Tariffs on bulk infant formula and dairy-based food preparations will be phased out over seven years, and tariffs on peptones, a dairy-based product, will follow the same timeline. A new quota of 3,000 tonnes has been created for albumins, a milk protein product, with the 22% tariff halved within that quota.

Crucially, India has committed to New Zealand a "Most Favoured Nation" (MFN) style provision designed to future-proof the agreement with regard to dairy products. It ensures that if India grants better dairy market access in future (lower tariffs or higher quotas) to other competitors, New Zealand has a formal right to request the same improved terms. Just how that plays out in reality we will have to wait and see.

The FTA also introduces a fast-track arrangement allowing Indian businesses to import New Zealand ingredients — including dairy — duty-free for the manufacture of products destined for export. It is the first time India has made such a commitment in any FTA, and it is seen as a potential foothold for New Zealand suppliers in India's rapidly expanding food processing sector, as the country pursues its ambition to become a global food manufacturing hub.

Above: PM John Key with Narendra Modi in New Delhi, 2016. Below: PM Helen Clark meets Indian External Affairs Minister Natwar Singh in Delhi in 2004/ Images PM's Office

Beyond goods, the deal also speeds up the import process, with India committing to  releasing all goods through customs within 48 hours of arrival, with perishable goods and express consignments to be cleared within 24 hours where possible. The deal also streamlines electronic documentation submission and access to a single customs portal - all designed to cut red tape and reduce the cost of doing business.

Immigration provisions have proven the most politically charged element of the agreement. The deal includes up to 1,667 temporary employment entry visas per year across occupations where New Zealand has skills shortages, including certain ICT and engineering fields, alongside culturally distinctive Indian professions such as Ayurvedic medicine practitioners, yoga instructors, and chefs. A working holiday scheme allows up to 1,000 young Indians aged 18 to 30 to visit annually, and Indian students' right to work up to 20 hours a week while studying here is now recognised.

The agreement has been welcomed broadly by business in both nations, but the path to the signing table was politically turbulent domestically. NZ First leader Winston Peters denounced the deal as "madness" and a "disgraceful sellout," while his colleague Shane Jones drew widespread criticism for describing the immigration provisions as a "butter chicken tsunami”, that NZ First would have no part of.

Labour leader Chris Hipkins eventually confirmed his party's support, but reiterated concerns over a clause committing New Zealand to promote NZ$33 billion of private sector investment into India over 15 years, calling the target "unrealistic" and warning businesses to proceed "with their eyes wide open."

ACT leader David Seymour praised Labour for its support, saying the opposition had "done the right thing by New Zealanders" and drawing a pointed comparison to Labour's handling of the Trans-Pacific Partnership in 2017.

Under leader Andrew Little, Labour opposed the original 12-nation TPP, arguing it failed several of the party's "bottom lines", including the inability to ban foreign house buyers.  After forming a coalition government in October 2017, the Jacinda Ardern-led Labour government became a key player in salvaging the new deal following the U.S. withdrawal.

With a general election due in November, the FTA has clarified some differences between the parties. NZ First has staked out firm opposition, framing the deal as a threat to sovereignty and New Zealand jobs. Labour has offered its cautious, qualified support. Meanwhile National and ACT are championing it as a generational economic milestone.

Trade Minister Todd McClay/Image National Party

The 300,000-strong Indian diaspora in New Zealand — described in government briefings as a vital "living bridge" between the two countries — is a politically significant community in several marginal electorates, and their reception of the agreement is being closely watched by campaign strategists. Whether Kiwi voters ultimately judge the FTA as a triumph of economic ambition or a reckless gamble on an investment clause they were never consulted about may prove one of the defining arguments of the campaign to come.

Asia Media Centre