Why a free trade agreement with New Zealand is good news for India

India is set to end 2025 on a strong diplomatic and economic note with the conclusion of negotiations for a Free Trade Agreement (FTA) with New Zealand. Announced jointly by Prime Minister Narendra Modi and his New Zealand counterpart Christopher Luxon, the pact is expected to double bilateral trade within five years. Beyond headline trade numbers, the agreement signals India’s accelerating push to integrate with global value chains and diversify its economic partnerships.

What has been agreed between India and New Zealand?

Negotiations for the India–New Zealand FTA began only in March 2025 and concluded by December — making it one of India’s fastest trade deals. The agreement is expected to be formally signed within the next two to three months.

At its core, the FTA enhances market access and offers tariff concessions for Indian exports entering New Zealand, while providing Indian consumers and businesses improved access to select New Zealand goods and services. Leaders on both sides have described the deal as a “historic milestone” reflecting strong political will and strategic trust.

Why this FTA matters for India’s trade strategy

India’s trade policy has shifted over the past decade from caution to calibrated openness. After opting out of the RCEP talks earlier, New Delhi has focused on bilateral FTAs that promise tangible gains. The New Zealand deal fits neatly into this approach.

For India, the FTA:

• Expands access for sectors such as textiles, pharmaceuticals, engineering goods, IT services and processed food.
• Reduces tariff and non-tariff barriers for Indian exporters in a high-income, rules-based market.
• Strengthens India’s presence in the Oceania region, complementing existing agreements with Australia.

Importantly, the pact positions India as a reliable trade partner amid global supply-chain rebalancing.

Gateway to Oceania and Pacific Island markets

New Zealand’s significance goes beyond its modest market size. It serves as a strategic gateway to the wider Oceania and Pacific Island economies, where India has been seeking deeper engagement.

Preferential access to New Zealand can help Indian firms build scale, brand credibility and regulatory familiarity — assets that are critical for expanding into Australia, Pacific Island nations and other Asia-Pacific markets. In geopolitical terms, this also enhances India’s footprint in a region where China’s economic influence has been growing steadily.

Opportunities beyond goods: services and skilled workforce

One of the less discussed but crucial aspects of the FTA is services and mobility. New Zealand faces skill shortages in areas such as healthcare, IT, construction and education — sectors where India has a large, globally competitive workforce.

The agreement opens pathways for Indian professionals, students and service providers, reinforcing India’s role as a supplier of skilled human capital. For New Zealand, this supports economic growth; for India, it creates employment opportunities and remittance flows.

How New Zealand benefits — and why it matters for India

From Wellington’s perspective, the FTA offers access to one of the world’s fastest-growing large economies. New Zealand exporters, particularly in agri-products, dairy processing, education services and clean technologies, gain a foothold in India’s expanding consumer market.

This mutuality matters. FTAs that are seen as balanced are more durable politically, reducing the risk of backlash from domestic industries on either side.

The broader context of India’s economic diplomacy

The India–New Zealand FTA comes amid a broader push by New Delhi to project itself as a stable, predictable and reform-oriented economy. Alongside trade deals, India has showcased its growing capabilities in space, aviation and manufacturing — reinforcing confidence among global partners.

By concluding a complex trade pact in under a year, India signals that it is serious about economic integration, even as it safeguards sensitive sectors.

What happens next?

The focus now shifts to formal signing, ratification and implementation. For Indian businesses, the real test will lie in how quickly they can leverage tariff reductions, comply with standards, and scale exports.

If executed well, the FTA could become a template for India’s future trade engagements — pragmatic, time-bound, and aligned with long-term strategic interests rather than headline liberalisation alone.