India-New Zealand free trade agreement takes effect

Why in the News

India’s trade pact with New Zealand has moved from talks that stalled in 2015 to an agreement in force, giving duty-free access to a range of Indian goods. The India-New Zealand Free Trade Agreement (FTA), signed in April, took effect on Tuesday as the seventh trade pact India has brought into force in five years.

What is the India-New Zealand FTA?

1. What it is: An FTA is a treaty under which two countries cut or remove import duties on each other’s goods. It works like two neighbouring markets dropping the toll each charges the other’s traders.
2. Two-way access: Indian goods, including products of labour-intensive sectors such as textiles and leather, enter New Zealand duty free. About 95% of New Zealand’s exports to India enter duty free or at sharply reduced tariffs.
3. Protected sectors: India kept dairy out of the deal, along with sensitive farm items such as onions, almonds, chickpeas, peas, artificial honey and sugar.
4. The takeaway: India opened its market to a farm exporter but kept shut the sectors that support its smallholders.

How did the pact come about?

1. Long negotiation: Talks began in 2010 and, after stalling, were revived in March 2025.
2. Signature and ratification: The pact was signed on April 27. New Zealand passed the law giving effect to it in September.
3. Investment pledge: New Zealand has committed $20 billion of foreign direct investment (FDI) over 15 years, a design similar to India’s pact with the European Free Trade Association (EFTA).
4. New Zealand’s view: New Zealand’s Prime Minister said Kiwi businesses can now reach over a billion more customers at significantly lower tariffs.

Where does the pact sit in India’s trade strategy?

1. Other recent pacts: The other six brought into force are agreements with the United Arab Emirates (UAE), Mauritius, the EFTA bloc, the United Kingdom, Oman and Australia.
2. Network size: The pact is India’s 17th operational FTA.
3. After RCEP: India left the Regional Comprehensive Economic Partnership (RCEP), an Asia-Pacific trade bloc that includes New Zealand, in 2019. This pact gives India a deal with an RCEP member on its own terms.
4. Mobility gains: India won visa concessions for its workers and students, and a visa quota for practitioners of AYUSH (Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy), India’s traditional medicine systems.

Challenges

1. Low preference use: Exporters often skip FTA benefits when rules of origin paperwork costs more than the duty saved.
2. Strict biosecurity: New Zealand’s strict standards on plant and animal products can block Indian goods that face zero duty.
3. Dairy pressure at review: New Zealand can press again for dairy access in later reviews of the pact.
4. Non-binding investment: New Zealand’s pledge only promises to facilitate investment, so no firm is bound to invest.

Way Forward

1. Exporter help desks: Export promotion councils should publish the tariff line, origin rule and documents for each covered product.
2. Mutual recognition: Seek recognition of Indian testing laboratories so certified goods clear New Zealand’s checks.
3. Investment tracker: Publish yearly data on inflows against the $20 billion pledge.

Conclusion

The pact is now in force, so attention shifts from negotiation to use. How many Indian exporters actually claim the preferences in the first year, and how much investment arrives against New Zealand’s pledge, will show whether the deal delivers.

Back2Basics: European Free Trade Association (EFTA)

1. Formation: EFTA was set up in 1960 by the Stockholm Convention, with its headquarters in Geneva.
2. Members: Iceland, Liechtenstein, Norway and Switzerland, none of them a member of the European Union (EU).
3. Pact with India: The Trade and Economic Partnership Agreement (TEPA), signed in March 2024, entered into force on 1 October 2025.
4. Investment design: TEPA commits EFTA to $100 billion of investment in India over 15 years.

Matching Previous Year Question

“[2010] In the context of the affairs of which of the following is the phrase ‘Special Safeguard Mechanisms’ mentioned in the news frequently ? (a) UNEP (b) WTO (c) ASEAN-Free Trade Agreement (d) G-20 Summits ANSWER: (b)”