NZ-India FTA: Congratulations are in order. So is cautious optimism

First, congratulations are in order. After years of diplomatic effort, stalled negotiations and repeated political signalling, New Zealand and India have finally announced a free trade agreement. For negotiators and officials on both sides, simply reaching this point deserves recognition. For businesses that have waited through more than a decade of false starts, the sense of relief is understandable. Yet it is precisely because this agreement has been so long in coming that the excitement must be tempered with realism.

On paper, the FTA looks ambitious. A large share of tariff lines are to be reduced or eliminated, and the deal is framed as opening the door to one of the world’s largest and fastest-growing markets. For a small, trade-dependent economy, the appeal of India’s scale is obvious. But experience suggests that scale does not automatically translate into access. India’s trade agreements are shaped as much by domestic priorities, regulatory practice and political sensitivities as by tariff schedules negotiated at the table.

Market size is not the same as market access

Agriculture, and dairy in particular, remains the central test. For decades, dairy has been both the prize and the obstacle in NZ–India trade talks. India’s dairy sector is not simply commercial; it is tightly bound to rural livelihoods and food security, making it politically sensitive. Any suggestion that this FTA meaningfully opens India’s dairy market needs to be read carefully. Limited access for specialised ingredients or products intended for re-export is not the same as broad, commercially meaningful entry. If core dairy products remain protected, the strategic upside for New Zealand is necessarily constrained.

Tariff reduction timelines also deserve scrutiny. Modern FTAs increasingly rely on phased liberalisation, sometimes extending over many years. That may suit some manufacturers, but it is less helpful for exporters dealing with perishability, seasonal demand or volatile prices. When benefits are delayed, those best placed to capitalise are typically large firms with deep balance sheets rather than the small and medium enterprises (the bulk of New Zealand businesses) often cited as the primary beneficiaries of trade agreements.

Balance is another issue that warrants caution. New Zealand already operates one of the world’s most open markets, with low tariffs and relatively straightforward regulatory systems. India’s framework is far more layered, reflecting a wider set of economic and social objectives. An agreement between such asymmetrical economies risks uneven outcomes. Indian exporters gain relatively quick access to a wealthy, predictable market, while New Zealand firms must navigate complex standards, certification processes and regulatory interpretation to realise their side of the bargain. That does not make the deal flawed, but it does make simplistic win-win narratives misleading.

A more conditional deal than the headlines suggest

There is also a detail in this agreement that has attracted far less attention than it should. Reports suggest the FTA includes a “rebalancing” or clawback mechanism allowing trade concessions to be rolled back if an expected US$20 billion of New Zealand investment into India does not materialise. New Zealand has described that investment figure as aspirational. India appears to be treating it as conditional. If trade access is linked to capital actually flowing, part of the commercial risk could be seen as shifting from governments to the private sector. Until the full text is released, the mechanics remain unclear, but the principle alone is enough to warrant caution. This is a more conditional agreement than many headlines suggest.

That said, the deal is not without clear wins. New Zealand appears to have secured genuinely strong outcomes for apples, including tariff reductions that even the United States has struggled to achieve. In specific sectors where access is clean, demand is growing and compliance is manageable, the agreement could deliver real gains.

Beyond tariffs, however, non-tariff barriers will still determine whether the FTA delivers at scale. Rules of origin, regulatory standards, licensing requirements and administrative discretion can quietly erode the value of headline concessions. India’s regulatory environment is improving, but it remains demanding and uneven across states, one of the reasons why India did not sign up to RCEP. Without sustained institutional engagement and practical problem-solving, many exporters may find that the agreement exists more as a framework than as a turnkey commercial pathway.

The inclusion of labour mobility and services provisions adds further complexity. India has consistently prioritised movement of people, professional services and education in its trade negotiations. These are legitimate interests, but they blur the line between trade policy and domestic social policy in New Zealand. When migration settings form part of an FTA, debate inevitably moves beyond economics into questions of public consent and political durability. Agreements that lack broad domestic confidence can become vulnerable over time. Coalition partner New Zealand First has already voiced its opposition to this deal.

There is also a temptation to load this FTA with geopolitical significance. In a world of shifting alignments, trade agreements are often presented as symbols of strategic partnership. Symbolism matters, but it should not be confused with structural economic change. India’s trade policy is driven first by domestic imperatives, not by external expectations, however friendly.

Opportunity exists but execution will decide the outcome

And yet, this is where a more upbeat note is justified. Even with its limitations, the FTA is likely to lift two-way trade steadily over the next five years, driven less by dairy and more by services, premium horticulture, forestry and education. New Zealand does have the capacity to scale in these areas, particularly in high-value services and niche goods, provided infrastructure, skills and regulatory cooperation keep pace. Just as importantly, the agreement creates predictability and a platform for dialogue, allowing problems to be addressed over time rather than negotiated from scratch.

The congratulations, then, are deserved. The caution remains essential. But with realistic expectations, patient execution and sustained engagement, this long-awaited agreement can still become a foundation for durable growth rather than a burst of short-lived enthusiasm.