India–New Zealand FTA: Why This Modest Deal Signals a Strategic Shift in India’s Trade Policy

India’s decision to formally conclude negotiations for a Free Trade Agreement (FTA) with New Zealand marks a quiet but important evolution in New Delhi’s global trade strategy. Unlike the ambitious, headline-driven mega trade pacts of the past, this agreement reflects a more calibrated approach — one shaped by hard lessons from earlier negotiations, sectoral sensitivities at home, and a clearer sense of where India’s comparative strengths lie.

Why This FTA Looks Different from India’s Earlier Trade Push

In absolute terms, the India–New Zealand economic relationship is modest. According to India’s Commerce Ministry, total trade in goods and services stood at just over $2 billion in FY25 — a fraction of India’s trade with major partners. Yet the agreement’s ambition to double bilateral trade within five years is less about scale and more about structure.

Rather than focusing primarily on tariff-heavy goods trade, the deal prioritises services, investment and mobility — areas where India has been seeking greater leverage after withdrawing from large, goods-centric agreements such as the Regional Comprehensive Economic Partnership (RCEP) in 2019.

The Mobility Clause: A Break from Conservative Precedent

The standout feature of the agreement is India’s success in negotiating a dedicated mobility window. Under the FTA, 5,000 Indian professionals “at any given time” will be eligible for three-year work visas in sectors where India enjoys strong domestic capabilities — information technology, healthcare, education and traditional medicine.

This is a significant departure from limited mobility arrangements elsewhere. For comparison, the Australia-India Economic Cooperation and Trade Agreement provides for only 1,000 annual “working holiday” visas, largely aimed at short-term, youth-oriented employment in hospitality and services.

Read alongside New Zealand’s decision to allow uncapped entry of Indian students into its higher education institutions — with a minimum 20-hour weekly part-time work entitlement — the FTA creates a people-centric economic bridge rather than a purely transactional trade arrangement.

Tariff Exclusions and the Shadow of RCEP

Equally revealing are the exclusions. Nearly 30% of India’s tariff lines have been kept outside the agreement, reflecting deliberate carve-outs to protect rural livelihoods. Dairy products, most animal products other than sheep meat, and select vegetable products have been excluded.

This caution is particularly significant given that dairy alone accounts for roughly a third of New Zealand’s global exports. The absence of such safeguards was one of the central reasons India exited RCEP, a pact in which both New Zealand and Australia were key players. The current agreement suggests that India has internalised that experience and is no longer willing to trade market access for domestic vulnerability.

Investment Commitments Beyond Goods Trade

The FTA also moves beyond a narrow focus on tariff liberalisation. New Zealand has committed to investments in India worth around $20 billion over the next 15 years, signalling intent to deepen economic engagement through capital flows, technology and long-term partnerships.

This aligns with India’s broader effort to position FTAs not just as tools for export growth, but as instruments to attract investment and integrate domestic firms into global value chains on more balanced terms.

Timing, Ratification and the Global Trade Climate

If ratified by New Zealand’s Parliament, the agreement is expected to come into force within seven months. The timing is notable. With global trade increasingly fragmented by geopolitical tensions, protectionism and supply-chain realignments, even incremental agreements carry strategic value.

For India, the gains may appear modest on paper. But they come at a time when New Delhi is prioritising depth and resilience over breadth in its trade engagements.

The Real Test Lies in Implementation

The success of the FTA will ultimately hinge on issues that lie beyond tariff schedules. Removal of non-tariff barriers — including recognition of Indian educational qualifications, alignment of quality standards, and clarity on rules of origin — will determine whether Indian firms and professionals can actually utilise the agreement.

Equally important will be the government’s ability to actively popularise the FTA among exporters, service providers and educational institutions that stand to benefit. If this sustained, patient work follows, the India–New Zealand FTA could emerge not as an exception, but as a template for India’s next generation of trade agreements.