Bilateral trade agreement expected to support pharmaceuticals, services, agriculture and investment flows

India and New Zealand signed their bilateral Free Trade Agreement on April 27, adding another partner to India’s expanding FTA network covering all RCEP countries except China. Despite New Zealand’s relatively small market size, the agreement is expected to create opportunities across pharmaceuticals, services exports, agriculture, and investment cooperation.

India and New Zealand signed their bilateral Free Trade Agreement on April 27, strengthening India’s growing network of trade partnerships across the RCEP region, excluding China.

Although New Zealand has a population of just 5.3 million and imports from India currently stand at around $700 million — accounting for only 1.8 per cent of New Zealand’s imports — the agreement is being viewed as an additional avenue for India to diversify and expand exports in 2025-26.

India’s merchandise exports finance only about 57 per cent of imports, making the addition of export destinations increasingly important. The presence of a 3,00,000-strong Indian diaspora in New Zealand and the scope for expanding services exports further support the agreement’s potential.

Under the FTA, Indian products entering New Zealand will receive duty-free access from day one. While New Zealand’s average MFN tariff is low at around 2 per cent and nearly two-thirds of tariff lines are already duty-free, several labour-intensive sectors important for India currently face higher tariffs.

Sectors Expected to Benefit

Garments currently attract average duties of nearly 10 per cent in New Zealand, while footwear and textile items also face relatively higher tariffs. The agreement is expected to provide Indian exporters tariff parity with competitors from China and ASEAN nations that already enjoy preferential access to the New Zealand market.

Indian generic pharmaceutical exports, currently accounting for around $60 million, are also expected to gain from the agreement. Side letters accompanying the FTA reportedly confirm that New Zealand recognises approvals granted by regulators in Australia, the EU, Canada, Singapore, the UK, Switzerland, and the US. This may help accelerate regulatory approvals for Indian prescription medicines, including generics and biosimilars, as well as medical devices already cleared by these regulators.

Other Indian export categories expected to benefit include shrimps, spices, tea, coffee, rice, gold jewellery, electrical machinery, auto components, and refined petroleum products. Tariffs on these products are expected to be reduced to zero, especially for processed agricultural products and spices.

On the import side, New Zealand exports mainly primary products to India, including wood and wood pulp, steel and aluminium scrap, coal, and wool. Fresh fruits remain among its leading exports to India, and the FTA provides limited tariff-rate quota access for apples, kiwifruit, albumins, and Manuka honey.

The agreement also includes seasonal safeguards reflecting New Zealand’s geographical advantage. Apple imports under the tariff quota will be permitted only from April to August, while kiwifruit imports will be allowed from April to mid-October to avoid overlap with the Indian harvest season. Minimum import price conditions will also apply.

Wine tariffs are expected to be reduced gradually under the agreement, depending on price bands. Dairy products, however, remain fully excluded. Overall, around 29 per cent of tariff lines have been kept outside tariff liberalisation, similar to exclusion levels under India’s ECTA with Australia.

Services and Investment Provisions

Services trade forms another important component of the agreement. According to New Zealand’s figures available at disaggregated levels, its services exports to India amounted to NZ$1.14 billion in 2025, approximately 1.68 times higher than its merchandise exports. Nearly 95 per cent of these exports came from travel services, particularly education-related travel spending by Indian students.

India’s own services exports to New Zealand are comparatively smaller at around NZ$470 million, while computer and business services account for only NZ$110 million. The FTA is expected to provide improved certainty regarding visas for intra-corporate transferees, installers and servicers, independent professionals, and accompanying dependants.

The agreement also introduces a new Temporary Employment Entry visa pathway with an annual quota of 5,000 visas for skilled Indian professionals for stays of up to three years. Covered sectors include IT, engineering, healthcare, education, and construction, while professionals such as AYUSH practitioners, yoga instructors, Indian chefs, and music teachers are also eligible.

An annex on student mobility and post-study work visas, along with a separate understanding on holiday work visas, has also been included.

The agreement further includes New Zealand’s commitment to facilitate $20 billion in FDI inflows into India over a 15-year period, reflecting provisions similar to those included in India’s FTA with EFTA countries. However, New Zealand’s cumulative FDI into India since 2000 amounts to only around $88 million, indicating that significant effort from both governments and industry bodies will be required to generate investor interest.

The FTA also includes provisions for economic and technical cooperation in sectors such as horticulture, apiculture, livestock, fisheries, wines, and organics, where New Zealand has recognised expertise.

India has additionally committed to a fast-track arrangement allowing duty-free imports from New Zealand for products used exclusively for further processing and re-export. This facility could potentially extend to dairy inputs otherwise excluded from the agreement.

A dedicated New Zealand investment desk is also expected to be established under the agreement to support investment facilitation and business engagement initiatives between the two countries.