At a time when developing and developed countries alike are navigating an increasingly unpredictable global trading regime, India is at a crossroads, fast emerging as a resilient player in international trade and as an increasingly reliable economic partner. The conclusion of the India-New Zealand Free Trade Agreement (FTA), announced by Prime Ministers Narendra Modi and Christopher Luxon on December 22, 2025, is a clear signal of this growing confidence. Coming soon after India’s FTAs with the United Kingdom and Oman, this agreement reflects a broader global shift toward diversifying trade partnerships and strengthening engagement with India. Domestically, the fast-tracked negotiations concluded within nine months, reflecting a political will to forge mutually beneficial global partnerships which concomitantly further India’s national goals and its global vision for a just, equitable and rules-based trading system.

Complementarity without compromise

Primed to be signed early next year, the India-New Zealand FTA emphasises services and labour mobility — areas where India enjoys a clear comparative advantage, but which have remained underleveraged in trade agreements. From both sides, there have been firsts, with India extending duty concessions on apples, and New Zealand offering India the widest service access so far, covering sectors such as IT, education, fintech, telecom, tourism and construction. There is also a commitment by New Zealand to invest $20 billion in India over 15 years.

Mobility provisions for skilled professionals in IT, engineering, health care, and education, and post-study work opportunities for Indian students, would increase the competitiveness of service providers, positioning India as a key supplier of high- and semi-skilled workforce. Moreover, amid policy unpredictability in several advanced economies posing headwinds for skilled mobility, they offer alternatives and stability for India’s youth and knowledge workers.

New Zealand has agreed to eliminate duties on 100% of its tariff lines, giving duty-free access to all Indian exports, while India has offered market access on 70% of its tariff lines. Benefits could accrue to India in labour-intensive sectors: textiles, apparel, leather, engineering goods, pharmaceuticals and farm products. Also, duty-free intermediate inputs such as wooden logs, coking coal, metal waste and scrap would lower manufacturing costs for final products, especially in steel, engineering goods and construction.

Inclusion of an annex on health and traditional medicine services creates new opportunities for India’s pharmaceutical and health-care sectors, giving them an edge over competitors such as China and the European Union. It would also reinforce India’s growing role as a global health partner.

Agriculture, often a sensitive area in trade negotiations, has been handled with balance. The FTA envisages value chain development through knowledge transfers and agri-technology collaboration on apples, kiwifruit, and honey. The livelihood of farmers, however, will not stand compromised since no duty concessions have been made in dairy, sugar, spices and edible oils.

Challenges in optimal utilisation

Overall bilateral trade, which was approximately $2.4 billion in 2024-25, is projected to double by 2030, post implementation of the FTA. However, it must be heeded that the success of any FTA lies in how it is utilised. In the past, India has exhibited a low utilisation rate of only about 25%, as in contrast with developed economies touching 70%-80%. FTAs often remain underused due to awareness gaps, compliance challenges, and non-tariff barriers (NTBs). However, the India-New Zealand FTA has provisions to address technical barriers to trade through enhanced regulatory cooperation, streamlined customs procedures and transparency.

Once implemented, the Confederation of Indian Industry (CII) recommends optimally leveraging the trade pact, with business associations, large enterprises and policymakers sharing responsibility to build awareness and developing capabilities to translate the negotiated benefits into effective market access. They should also look beyond tariffs and expand services trade, deepen skills and education linkages, and leverage mobility and diaspora networks.

A strong foundation exists

The FTA can build on the strong foundations of a growing middle class, a skilled workforce, and a reform-driven, innovation-based Indian economy. It carries elements of global integrated production and service export growth (India already ranks among the top five globally), both of which can propel Indian firms up global value chains and towards the $7 trillion economy goal by 2030. Notably, with the India-New Zealand FTA deal, India has now concluded economic partnership agreements with all Regional Comprehensive Economic Partnership (RCEP) members, except China.

Notwithstanding the modest quantum of bilateral trade, the significance of the India-New Zealand FTA lies not just in trade data. Rather, it marks a coming of age in the way India is viewed on the world stage. The kind of access in terms of labour mobility and services that New Zealand is willing to extend to India, reflects growing strategic trust from developed economies in bilateral economic engagements. This is a particularly welcome development amid India’s trade talks with other partners, including the European Union, lending credence to India as a country with a stable trade policy, and capable of establishing norms of effective cooperation through balanced, high-quality agreements that protect domestic interests while promoting openness and growth.

Chandrajit Banerjee is Director General, Confederation of Indian Industry (CII)

Published – December 31, 2025 12:08 am IST