The India-New Zealand Free Trade Agreement (FTA), signed off by Indian Prime Minister Narendra Modi early this week, leans on bi-partisan support as it awaits its passage through the New Zealand Parliament.
With coalition partner New Zealand First withholding support for the deal, Prime Minister Christopher Luxon is having to shore up support across the aisle from Opposition Labour MPs in the House.
Under the deal, thousands of temporary work visas are on offer annually for IT, engineering and health professionals from India. Also, Indian students can look forward to more post-study work opportunities as well as Working Holiday visas.
But it is the speed leading up to the FTA that has drawn attention. Negotiations resumed in March 2025 after a long hiatus of close to a decade. India is currently engaged in talks to seal trade pacts with the US and the EU, having inked agreements with the UK and Oman.
The flurry of trade deals demonstrates that New Delhi is keen to open up new export destinations as part of its counter-strategy to blunt the impact of the Trump administration’s recent tariff hike on Indian imports to the US.
New Delhi is also signalling to its trade partners that the dairy sector remains sacrosanct and is non-negotiable.
Shortly after New Delhi announced the conclusion of the FTA with New Zealand,Indian Commerce Minister Piyush Goyal confirmed that India will never open up the dairy sector to free trade.
This reinforces the perception of India as “protectionist”
The collateral consequence of the India-NZ trade deal is that it looks past the stereotypical perception of India as being protectionist around dairy and, instead, shifts the focus to building bridges between the two economies against a backdrop of global uncertainties.
But this is not an outcome that New Zealand First’s Peters wants to see. Instead, he appears to be set on a trajectory of whipping up xenophobic concerns around what he sees as an unfair trade-off between trade and the volatile issue of immigration.
“Regrettably, this is a bad deal for New Zealand. It gives too much away, especially on immigration, and does not get enough in return for New Zealanders, including on dairy,” he notes.
Peters buttresses his opposition to the deal by pointing to the value of New Zealand’s major dairy exports globally, including milk, cheese and butter, which totalled $24 billion, or “30% of our total goods exports, in the year to November 2025.
Peters sees an incongruity in the FTA with India that relates less to two-way trade than to “encouraging the movement of people from India to New Zealand and New Zealand investment in India.” Peters argues the influx of labour from India will only add to pressures on the labour market, “with too many New Zealanders in unemployment or doing it tough economically."
It is clear that the trade deal with India is disrupting coalition harmony within the National-led government in New Zealand.
All eyes are, therefore,on the Labour caucus meeting slated for the New Year, when the party will discuss the deal and decide its stand in parliament. The party’s trade spokesman Damien O’ Connor is on record as saying that an agreement with the world’s most populous nation is “worth supporting.”
Prime Minister Luxon can draw comfort from the fact that the ACT Party, his other coalition partner, is not up in arms over the trade deal, too.
The present blow-out over trade with India is tinged with irony. As foreign minister, Peters presides over the functioning of New Zealand’s Ministry of Foreign Affairs and Trade, which notes “ partnering more closely with India helps New Zealand support a stable, rules-based trading order and advance shared interests in security and prosperity.”
It notes that by 2030, India’s GDP is expected to reach around NZ $12 trillion, making it one of the world’s largest economies.
MFAT predicts the “impact and value of the NZ-India FTA will “grow over time.”
Clearly, the minister appears to be at odds with his ministry.
The India-New Zealand trade deal will be signed in early 2026, before being pushed through Parliament. Legislation is unlikely to be passed before the next general election due the same year, which means the trade deal will transform into a hot campaign issue. Trade Minister Todd McClay is already calling the deal “historic”.
Prime Minister Luxon had made the trade deal with India the centrepiece of his poll campaign in 2023, while accusing the then Labour government of sidelining India by not restarting the stalled trade dialogue.
Labour had put the dairy sector at the core of any renewal of talks with India, which meant the FTA was mothballed.
But National saw this as an opening. “ The Foreign Minister has visited India twice. Earlier this year, I led New Zealand’s largest-ever trade mission to India. And New Zealand has hosted India’s President and two ministerial visits from India.
“The result is a high-quality trade agreement with a trusted partner that will deliver deep and lasting benefits for New Zealand,” Luxon proclaims.
That rhetoric has put Labour on the backfoot.
While delivering on that head start is key, there is no doubt that the India-New Zealand trade deal represents a breakthrough in bilateral ties between the two countries.
Venu Menon is a senior journalist based in Wellington. He was Consulting Editor of The Hindu in India prior to moving to New Zealand.