From lamb chops to wine bottles: What the India deal means for the South Island

Wednesday, 8 July 2026

The Government says an India trade deal could transform New Zealand’s exports, but official modelling suggests a more modest result - and for the South Island, the benefits will be far from evenly shared.

Sheep meat, wool and forestry stand to benefit quickly, while wine and seafood face a slower payoff, and dairy - one of the South Island’s biggest export engines - largely misses out.

New Zealand’s agreement with India is moving through Parliament amid political debate, with Trade Minister Todd McClay hoping it will take effect before the end of the year, while Indian Prime Minister Narendra Modi is due in Auckland on Friday.

At its simplest, the agreement makes some South Island exports cheaper to sell in India by cutting the tariffs charged at the border.

“This will be transformational and over time it will be as important to our economy … as the China free trade agreement,” McClay said.

However, official modelling commissioned by the Ministry of Foreign Affairs and Trade suggests the gains will be modest. By 2036, New Zealand exports to India are forecast to be $817.4 million higher than without the agreement.

But it also says some trade will shift away from other markets, and points to small wage gains rather than a sudden surge in jobs.

Who gains first?

Sheep farmers and meat processors are among the clearest South Island winners.

India’s 33% tariff on New Zealand lamb and mutton will disappear when the agreement takes effect, putting exporters on a more even footing with Australian suppliers, which already have tariff-free access.

“If everybody in India this year eats one lamb chop, you do not produce enough lamb in the South Island to feed that market,” McClay said.

If the tariff cut leads to new orders, the gains could show up through stronger farm returns, steadier meatworks shifts and more freight moving through South Island ports.

Wool also becomes tariff-free when the agreement takes effect. That will reduce costs for Indian buyers, although the existing tariff is much smaller than the one on sheep meat.

Forestry businesses could benefit quickly because many wood products also become tariff-free from the start. McClay said one South Island company had already sent its first shipment to India after joining a government trade mission and was preparing a second.

Seafood exporters will gain more gradually, with tariffs on many fresh, chilled and frozen products removed over five to seven years.

What about wine?

For Marlborough, Central Otago and North Canterbury wineries, the opportunity is mainly at the premium end of the market.

India currently charges a 150% tariff on New Zealand wine. Under the agreement, that will fall immediately for mid-priced and premium bottles, then decline further over 10 years.

The scale of the change is easiest to see in the price of one bottle.

A bottle of wine worth about NZ$35 at the border currently attracts about $52 in Indian tariffs. Under the deal, that tariff would fall to about $26 straight away and about $9 after 10 years.

Cheaper wine receives no tariff reduction, meaning the deal favours premium producers rather than bulk exporters.

Beyond farms and factories

Tourism, education and services could also benefit, although those gains are harder to predict.

McClay expects direct flights between India and New Zealand within several years, but the agreement does not guarantee a route.

“They’re not coming to have a look at the Sky Tower, they’re coming to have a look at the beautiful South Island,” McClay said.

Tertiary institutions could also gain if stronger ties encourage more Indian students to study in Christchurch, Lincoln, Dunedin and other centres.

The Government has already begun trying to connect South Island businesses with the Indian market. Prime Minister Christopher Luxon travelled to India last year with representatives from 38 businesses and organisations, including Christchurch International Airport, HamiltonJet, Ngāi Tahu Holdings and WoolWorks.

McClay said the Government planned to bolster New Zealand Trade and Enterprise’s presence in India and increase support for South Island businesses.

How does that reach households?

Households should not expect a sudden drop in grocery bills.

The more likely effect is indirect with, for example, more meat orders meaning extra shifts at a processing plant. Stronger wine sales or visitor numbers could support jobs in hospitality, accommodation and transport.

Economists caution that trade deals do not automatically reach households.

NZIER principal economist Chris Nixon has said the India agreement is unlikely to transform the economy overnight, with much of its value lying in long-term diversification, stronger relationships and the ability of businesses to use the access it creates.

McClay said the main household benefit would come through greater job security, higher-paying export work, more consumer choice and stronger spending in regional communities.

Who misses out?

Dairy is the biggest South Island omission with India keeping its protection for core products including milk powder, butter and cheese, leaving farmers in Canterbury, Otago and Southland with little immediate benefit.

By 2036, dairy exports to India are forecast to be only $600,000 higher than without the agreement, compared with $130.6m for meat and $282.7m for forestry and wood products.

McClay acknowledged he had wanted greater dairy access.

Beef and deer farmers also receive little new access, while smaller exporters may also struggle to use the FTA.

Lower tariffs do not remove the cost of finding distributors, meeting Indian regulations, shipping products long distances or establishing a presence in the market. Large exporters with existing staff and international networks are likely to move first.

Removing New Zealand tariffs on Indian goods may bring cheaper products and components, but it could also create greater competition for local businesses producing similar goods.