India-New Zealand Free Trade Agreement (FTA)
India and New Zealand have concluded talks on a free-trade agreement (FTA) that promises significant economic engagement between the two nations.
Key Features of the Agreement
- Zero-Duty Access: New Zealand will grant zero-duty access to 100% of Indian exports.
- Foreign Direct Investment (FDI): New Zealand commits to $20 billion in FDI over the next 15 years.
- Liberalised Duties:
- India will liberalize duties on 70% of tariff lines, covering 95% of New Zealand’s exports to India in value terms.
- Immediate elimination of duties on 30% of tariff lines.
- Exclusion List: Approximately 29.97% of tariff lines are excluded, including dairy products, vegetables, and other sensitive items.
Sector-Specific Provisions
- Dairy Sector: New Zealand sought greater market access, but India excluded it, insisting on protecting its domestic dairy sector.
- Tariff Reductions:
- India’s average tariff on New Zealand imports will drop to 13.18% immediately, 10.3% in five years, and 9.06% by the 10th year.
- New Zealand’s average applied tariff will reduce from 2.2% in 2025 to zero.
- Services Sector: The FTA contains India’s most ambitious services offer, including:
- No numerical caps on Indian students.
- At least 20 hours of work per week during study.
- Expanded post-study work opportunities.
- Temporary Employment Entry visa for 5,000 Indian professionals for up to three years.
- Market Access: Commitments in approximately 118 services sectors, benefiting Indian exporters in textiles, apparel, leather, ceramics, and more.
Investment and Safeguards
- Rebalancing Mechanism: Allows India to suspend FTA benefits if New Zealand’s investment commitment is unmet.
- Historical Investment: New Zealand’s cumulative FDI into India has reached about $88.24 million.
Strategic Implications
- The FTA reflects India’s strategy to diversify trade ties amidst global realignment.
- It is India’s third trade deal with a "Five Eyes" country, after Australia and the UK, with ongoing talks with Canada and anticipated negotiations with the US.
- The agreement is positioned to double the current $2.4 billion bilateral trade in goods and services within five years.
Economic Impact
- India aims to strengthen practical economic links through supply chains, expanding services trade, and leveraging diaspora provisions.
- In 2024, bilateral merchandise trade was $1.3 billion, with total trade in goods and services at $2.4 billion. Services accounted for $1.24 billion.
