India has secured $ 20 billion investment commitment over 15 years and zero duty access to the New Zealand market for all its products in the free trade agreement (FTA) finalised on Monday in return for allowing imports of sheep meat, wines, apples, wood, petroleum, steel and aluminium on reduced duties.
The conclusion of the negotiations on the FTA which took nine months was announced after a telephonic conversation between Prime Minister Narendra Modi and New Zealand Prime Minister Christopher Luxon. The agreement is likely to come into force by July-August of next year after the completion of the legal process, commerce and industry minister Piyush Goyal said.
What happens now?
The next step is the legal vetting of the text of the FTA that will take two months and then the signing. For coming into force the approval of the New Zealand parliament will be required, which would be time consuming. Through the agreement both countries are aiming to double their bilateral trade in goods and services to $ 5 billion from $ 2.4 billion at present.
In 2024-25 the bilateral goods trade stood at $ 1.29 billion with India’s exports at $ 711.08 million and imports at $ 587.15 million. India’s services exports to New Zealand stood at $ $ 634 million in 2024 and imports were $ 611 million.
In case the investment commitments of $ 20 billion are not met then India will have the option to reverse the concessions it has given to New Zealand. It is the second FTA where India has secured investment commitments, the first one was with European Free Trade Association (EFTA)
Tariffs maintained by New Zealand
New Zealand maintains tariffs of around 10% in 450 lines of key Indian exports like textiles and apparel, leather, ceramics, auto and auto components. Its market access offer covers immediate elimination of duties on 100% of 8,284 tariff lines from the day of entry into force.
This market access enhances the competitiveness of India’s labour-intensive sectors including textiles, apparel, leather, footwear, marine products, gems and jewellery, handicrafts, engineering goods and automobiles,
India has offered market access in 70.03% of the tariff lines while keeping 29.97 % tariff lines in exclusion. The products on the exclusion list are dairy, animal products other than sheep meat, vegetable products, sugar, artificial honey, animal, vegetable or microbial fats and oils, gems and jewellery, copper and aluminium goods. Tariff elimination by India will be in phases.
India will immediately remove tariffs on wood, wool, sheep meat, leather and raw hides. On petroleum, machinery and some milk derivatives like peptones the tariff elimination will be in phases. In wines, pharma, iron and steel, polymers and aluminium the duties will be reduced but not eliminated.
On honey, apples, kiwi fruit and albumin including milk albumin the duties will be reduced and a quota on imports will be placed. On apples duties will come down to 25% from 50% for imports of 32,500 metric tonnes. In the sixth year of the FTA this quantity will go up 45,000 metric tonnes. Minimum import prices of $ 1.25 per kg have also been imposed. Similar restrictions will apply on manuka honey, kiwi fruit and albumins.
In return for market access in apples, honey and kiwi fruit,, New Zealand will also assist Indian farmers in improving their productivity.
In services India has secured commitments across a wide range of high-value sectors including IT and IT-enabled services, professional services, education, financial services, tourism, construction and other business services, opening substantial new opportunities for Indian service suppliers and high-skill employment. India has secured commitments in 118 services sectors and sub-sectors along with liberal commitments on mobility of students.
In pharma and medical devices Indian companies would get faster regulatory access by enabling acceptance of inspection reports from comparable regulators, including approvals by the US Food and Drug Administration, European Medicines Agency and UK’s Medicines and Healthcare products Regulatory Agency.
India and New Zealand decided to launch FTA negotiations in March and the first round of talks were held in May. The completion of negotiations took five formal rounds and many intersessional meetings.