India and New Zealand Forge New Trade Agreement: What It Means for Businesses

A New Era of Trade Relations

New Delhi: On Monday, India and New Zealand officially signed a free trade agreement (FTA) designed to enhance bilateral trade and investment opportunities.

The signing ceremony featured Commerce and Industry Minister Piyush Goyal alongside New Zealand's Trade and Investment Minister Todd McClay.

This FTA grants duty-free access for all of India's exports to New Zealand, encompassing every category of goods. It is anticipated to significantly benefit micro, small, and medium enterprises (MSMEs) and create jobs by improving competitiveness in sectors such as textiles, apparel, leather, footwear, gems and jewellery, engineering products, and processed foods.

Previously, New Zealand imposed peak tariffs of up to 10% on several key Indian exports, including ceramics, carpets, automobiles, and auto parts.

With the implementation of this agreement, Indian products will gain zero-duty access, allowing them to compete effectively in the New Zealand market.

Moreover, India has successfully negotiated duty-free access for essential manufacturing inputs like wooden logs, coking coal, and metal scraps, which will help reduce production costs and boost the global competitiveness of Indian industries.

In return, India has agreed to liberalize tariffs on 70.03% of tariff lines, which accounts for 95% of the total trade value, while protecting sensitive sectors by excluding 29.97% of tariff lines.

Excluded products primarily include dairy items (milk, cream, whey, yogurt, cheese), certain animal products, agricultural goods (onions, chickpeas, peas, corn, almonds), sugar, artificial honey, fats and oils, arms and ammunition, and various metals and their articles.

For 30% of New Zealand's tariff lines, India will eliminate duties on products such as wood, wool, sheep meat, and raw leather.

Additionally, 35.60% of tariff lines will see phased duty elimination over periods of 3, 5, 7, and 10 years, covering items like petroleum oil, malt extract, vegetable oils, and selected machinery.

New Zealand will benefit from reduced tariffs on products including wine, pharmaceuticals, polymers, and various metal articles, with only 0.06% of goods falling under tariff rate quotas, such as Manuka honey and apples.

The FTA also includes a commitment to facilitate USD 20 billion in investments into India.

A rebalancing clause is part of the agreement to ensure a framework for addressing any potential shortfalls in investment, aiming for solid economic outcomes.

In 2024, total bilateral trade in goods and services reached USD 2.4 billion.