India–New Zealand FTA Keeps Dairy Market Closed

India has firmly protected its domestic dairy sector under the newly concluded India–New Zealand Free Trade Agreement, even as it opens a limited window for export-oriented investment. Commerce and Industry Minister Piyush Goyal clarified that the pact does not allow market access for dairy imports, addressing concerns from farmer groups and political stakeholders.

Ring-Fenced Dairy Processing Arrangement

Under a tightly defined investment framework, New Zealand companies will be permitted to bring dairy raw materials or ingredients into India solely for processing and re-export. The arrangement mandates that 100 per cent of the finished dairy products must be exported overseas, with no diversion into the Indian market. This mechanism will operate through a fast-track approval route designed exclusively for export-focused manufacturing units.

No Duty Concessions on Dairy Imports

Piyush Goyal reiterated that India has not offered any duty concessions on dairy imports as part of the free trade agreement and will not do so in the future. He underlined that dairy remains completely outside the scope of the FTA, which is scheduled to come into force next year. The sector is considered highly sensitive due to its role in supporting millions of small and marginal farmers across the country.

Side Letter Carries No Binding Commitment

Addressing queries about a side letter attached to the agreement, the minister said it merely provides for consultations during future reviews and carries no obligation. The provision was included at New Zealand’s request, allowing discussions only if India were ever to open its dairy sector to another comparable economy. Goyal stressed that this scenario is unlikely, as India has consistently treated dairy as a red-line issue in all trade negotiations.

What to Note for UPSC Prelims?

• India has never opened its dairy sector under any free trade agreement.
• New Zealand is one of the world’s largest dairy exporters.
• FTAs can include side letters for consultation without binding commitments.
• Dairy is a politically sensitive sector due to farmer livelihoods.

Limited Current Dairy Trade with New Zealand

Despite its global prominence in dairy exports, New Zealand has minimal dairy trade with India at present. In FY2025, its total dairy exports to India stood at just over $1 million, covering products such as milk, cream, butter, mozzarella cheese, honey, and skimmed milk. The new FTA framework seeks to boost investment-led exports without compromising India’s domestic dairy ecosystem.