Why business' celebrations over India free trade agreement are tempered with concern

Sunday, 31 May 2026

The Free Trade Agreement between New Zealand and India has industry backing, but there is nervousness about whether India’s notorious system of “non-tariff barriers” will really be dismantled. Pictured are PM Christopher Luxon with Indian PM Narendra Modi in 2025.

ANALYSIS: Businesses see the New Zealand India Free Trade Agreement (FTA) as a win, but some sectors remain nervous about whether India will tear down the non-tariff barriers that need to go in order for Kiwi exporters to get the full benefits promised.

The deal is proving controversial, with opponents saying it undermines democracy, fails to protect animal and labour rights, and provides no meaningful market access for New Zealand’s dairy producers, even where there is a clear demand and lack of supply in India for high-quality, pasture-fed dairy.

It’s also created political tensions with ACT and New Zealand First, who are unhappy the agreement “affirms” the United Nations Declaration on the Rights of Indigenous Peoples, though ACT told The Post it had been assured the reference was non-binding, and it was not a hill on which the party, which supports the FTA, would die.

The Parliamentary process, including select committee hearings, which the FTA must now pass to come into effect is ongoing, but with National, Labour and ACT all committed to the FTA, it seems a foregone conclusion.

The only options, other than accepting, or rejecting the FTA, would to go back to negotiations with India, which ACT believes is not feasible.

Tie our hands?

NZ First does not believe that immigration settings should be in an FTA, and that including them could tie the hands of future governments should they wish to restrict immigration during periods of high unemployment.

There’s also disbelief in some quarters that the FTA appears to bind New Zealand, which has underdeveloped capital markets and a massive infrastructure deficit, to investing US$20 billion in India in the first 15 years of the agreement, facing retaliatory action by India, for example through the imposition of new tariffs, if it fails.

On the flipside, the Ministry of Foreign Affairs and Trade says India will expand two-way trade with one of the largest and fastest-growing economies in the world, and help diversify New Zealand’s trade, which in an age of political instability in major trading partners was necessary.

Though India is currently only New Zealand’s 11th largest trading partner, representing 1.8% of all exports, MFAT says the FTA will eliminate and reduce tariffs on 95% of current New Zealand exports to India, with 57% going duty-free from day one, increasing to 82% over 10 years.

Indian exporters, by contrast, will see all tariffs removed by New Zealand.

A national benefit analysis shows the net gain for the economy would be around 0.7% of GDP after 10 years, or just $401m, and there are risks.

Key to the success for New Zealand’s exporters, however, is India dismantling the non-tariff barriers, including its labyrinthine customs bureaucracy and subsidies to domestic enterprises.

And on this, some sectors, remain nervous about the FTA, which more fairly might be termed a LTA, or lower tariff agreement.

There have been concerns that the FTA includes a commitment to helping India build its Kiwifruit sector, generating long-term competition for New Zealand Kiwifruit growers, though Zespri dismissed the concerns saying an Indian Kiwifruit sector would be ‘complementary and counter-seasonal’ to New Zealand’s.

Apples, pears and kiwifruit

The FTA delivers a tariff reduction from 50% to 25% within “quota” on apples, though NZ Apples and Pears, the political lobbying body for the industry, says the FTA includes mechanisms to pursue further improvements over time, including tariff reductions and quota expansion.

The tariff on New Zealand pears into India will drop to 16.5% tariff over 10 years.

But, the NZ Apple and Pear association warned: “Maximising the benefit of this access will also require continued progress in addressing non-tariff barriers that impact the efficiency and cost of trade.”

Zespri, the world’s largest marketer of kiwifruit, said exports to India had been constrained by a 33% tariff.

In the 2024/25 season alone, India clipped the ticket with tariffs of $9 million on the 7200 tonnes of kiwifruit exported to India.

Under the FTA, Kiwifruit would be tariff-free under “quota” (reaching up to 15,000 tonnes by Year 6), with anything over being subject to a tariff that’s lower than it currently is.

However, Zespri feared India’s customs bureaucracy might prove a drag, and called for the establishment of “clear, efficient arrangements for administration of the kiwifruit tariff rate quota”.

New Zealand meat exports to India have been hindered by high Indian tariffs.

Meat challenges

The red meat sector was also concerned over “prohibitive regulatory requirements, and excessively prescriptive animal health requirements” that were making trade with India difficult.

There was high demand for high-quality protein in India, but high Indian tariffs, combined with the non-tariff barriers, meant trade was small.

“Red meat sector exports were worth $91 million in 2025, but 85% of this trade was wool,” said Beef + Lamb, and the Meat Industry Association.

Meat exporters welcomed the part of the FTA in which India promised to dismantle non-tarrif barriers, and allowed perishable imports to be released by India customs within 24 hours of arrival.

Under the FTA, tariffs on sheep meat would fall from 33% to zero, and the enormous 110% tariff on processed meat would reduce to zero over seven years.

India’s 22% tariff on pet food would be reduced to zero over 10 years.

Though the meat industry did not raise any concerns, the Animal Policy International activist group said India permitted cruel farming practices no longer lawful in New Zealand, including battery cages for egg-laying hens.

India needs softwood as it lacks the capacity to supply its construction and furniture sectors.

It feared the FTA could lead to an increase in cruelly-produced animal products arriving in New Zealand from India in competition with locally-produced animal products.

Timber and logs

India’s construction and furniture sectors were booming under its “Smart Cities Mission and Housing for All” policy, and as India had little in the way of softwood forests, it was dependent on imports.

India’s tariffs range from 5.5% to 11% and, when combined with non-trade barriers they were acting as a disincentive to exporters, the association said.

Tariffs on log and timber imports will fall to zero once the FTA is in place.

That could revive New Zealand’s wood exports to India.

“The decline of New Zealand wood product and forestry exports to the Indian market has come about due to several reasons including tariffs, the difficulty in dealing with Indian bureaucracy, the use of Non-Tariff barriers to support the Indian wood processing industry, and phytosanitary measures,” the association said.

In the FTA, India undertook to address non-tariff barriers, such as a legally binding commitment for India’s customs service to release all goods within 48 hours of arrival.

Indian tariffs on imported wine are very high, sometimes as much as 150%.

However, the association said: “Monitoring the use of subsidies within India could be challenging.”

NZ First has complained that New Zealand does not have enough diplomats, which play a vital role in securing its trade.

Wine-producers

Industry association NZ Winegrowers, which exports $2 billion in wine each year, anticipates a 13% annual growth in the Indian wine market in each of the next five years.

However, the FTA with India only reduces its currently extraordinarily high tariffs on wine, which can currently be as high as 150%.

These are the highest tariffs on wine anywhere in the world.

“The FTA offers welcome tariff relief with phased reductions over 10 years. However, tariffs will remain relatively high,” NZ Winegrowers said.

There was the possibility of a better deal emerging. India has committed to reducing tariffs so New Zealand wine exporters pay the same as importers from other countries that agree better FTAs.

“We understand the European Union has subsequently agreed with India that European wine will receive deeper tariff reductions,” it said, urging New Zealand to get the FTA ratified as soon as possible, or there would be a risk of Kiwi wine exporters being at a comparative disadvantage.

Coal

For some sectors, there are no concerns with the FTA.

Bathurst Resources is New Zealand’s largest coal mining company, producing around 2 million tonnes each year from mines in the Waikato, the West Coast, and Southland.

Most of its coal is used for steelmaking in New Zealand, and overseas, primarily in Japan, South Korea, India and China.

India is one of New Zealand’s largest export destinations for coking coal, used in the production of iron and steel, and the 2.75% tariff India charges will be eliminated the FTA.

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