India-New Zealand FTA kicks in; duty-free access for Indian goods; gains hinge on competitiveness

The India-New Zealand Free Trade Agreement (FTA) came into force on Tuesday, giving all Indian goods duty-free access to the New Zealand market and opening new opportunities for exporters in labour-intensive sectors such as textiles, garments, leather and footwear, as well as engineering goods, ceramics and automotive components. The pact eliminates 100 per cent tariffs on Indian exports to New Zealand, while 95 per cent of New Zealand’s exports to India will be either allowed tariff-free or at sharply reduced levies.

However, the incremental gains from tariff elimination may be more limited than the headline benefit suggests, as 58.3 per cent of New Zealand’s tariff lines were already duty-free, according to an analysis by Ajay Srivastava of the Global Trade Research Initiative (GTRI).

Trade Ties

The agreement, signed on April 27, is India’s 17th operational free trade agreement and the seventh trade pact to come into force in the last five years. The pact is part of the two countries’ broader ambition to double bilateral trade in goods and services to NZ$7 billion (about ₹35,000 crore) by 2030.

Export Boost

“The FTA includes two Temporary Employment Entry (TEE) visa categories, expanded post-study work rights for some Indian graduates, commitments around in-study work rights for Indian students and a new working holiday scheme,’ the Immigration department said in a statement.

For Indian exporters, the removal of tariffs across all New Zealand tariff lines provides an opportunity to improve price competitiveness in a market where duties on some products were as high as 10 per cent. Textiles, apparel, leather goods, footwear, carpets, ceramics, machinery and automotive components are among the sectors that stand to benefit. The gains could be particularly relevant for labour-intensive industries and micro, small and medium enterprises (MSMEs) seeking to diversify export markets.

However, tariff elimination alone may not translate into a commensurate increase in shipments. Strict food-safety standards, costly certification, high freight charges and lengthy shipping times remain obstacles for Indian exporters, particularly those dealing in agricultural and processed food products. The extent to which businesses can use the new market access will depend on their ability to meet regulatory requirements, establish distribution networks and compete on price and quality.

Market Access

The agreement also provides New Zealand with preferential access to the Indian market. India will open about 70 per cent of its tariff lines, covering nearly 95 per cent of New Zealand’s exports, including wool, wood, coal and wine. Dairy, sugar and edible oils have been excluded from tariff concessions, thus protecting sensitive domestic sectors.

Some agricultural products, including apples, kiwifruit and Mānuka honey, will receive concessions through tariff-rate quotas, which limit the quantities eligible for preferential duties. The treatment of apples is particularly significant for domestic growers. Under the agreement, apple import duties will fall from 50 per cent to 25 per cent within a quota initially set at 32,500 tonnes, rising to 45,000 tonnes from the sixth year. The concessional window will be restricted to April-August, and imports will be subject to a minimum price of US$1.25 per kg.

While these restrictions provide safeguards, the concessions could increase competitive pressure on apple growers in Kashmir and Himachal Pradesh. The impact will depend on the volumes imported under the quotas, the prices at which they enter India and the ability of domestic producers to compete.

Wine will receive price-based tariff reductions rather than quota-based access. Wines priced below US$5 per 750 ml bottle will continue to attract a 150 per cent duty. For wines priced between US$5 and US$15, the duty will fall to 100 per cent immediately and 50 per cent by the tenth year. For wines priced at US$15 or more, the duty will decline from 150 per cent to 75 per cent immediately and to 25 per cent by the tenth year.