In a significant diplomatic and economic milestone, India and New Zealand announced the conclusion of negotiations for a comprehensive Free Trade Agreement (FTA) on Monday, December 22, 2025. The pact, finalized in a record nine months, sets an ambitious target of doubling the bilateral trade within the next five years. The current trade volume between the two nations stood at $1.3 billion in the 2024-25 financial year.
A Swift and Strategic Agreement
The formal negotiations for this landmark deal were kickstarted on March 16, 2025, during a meeting in New Delhi between Prime Minister Narendra Modi and his New Zealand counterpart, Christopher Luxon. Announcing the conclusion, PM Modi termed it a "historic milestone" reflecting a strong shared political will. He stated the agreement sets the stage for scaling newer heights in the India-New Zealand partnership.
While the talks have concluded, the final signing is expected in 2-3 months, pending a "legal scrubbing" process. Implementation will follow after the deal is passed by the New Zealand Parliament, a process that could take over six months. The Indian Cabinet has already granted its approval.
Key Provisions and Mutual Benefits
The FTA outlines a framework for extensive tariff liberalization. India has agreed to reduce tariffs on 95 per cent of products exported from New Zealand. In return, Wellington will eliminate tariffs on 100 per cent of its tariff lines for Indian exports. However, experts note that the immediate gains for India in goods trade may be modest as New Zealand's average tariffs are already among the world's lowest at about 2.3%.
To bring balance, New Zealand has committed to $20 billion in investments into India over the next 15 years. This investment pledge is in exchange for improved access to India's large, high-tariff consumer market.
A standout feature of the agreement is its focus on people-to-people ties and skilled mobility. For the first time with any country, New Zealand has created a dedicated pathway for Indian students and professionals. The deal removes caps on Indian students, guarantees work during study, and offers extended post-study work visas—up to three years for STEM graduates and four years for PhD holders.
Furthermore, a new Temporary Employment Entry (TEE) Visa pathway has been established for Indian professionals in skilled occupations, with a quota of 5,000 visas at any time for stays up to three years. This covers fields like IT, engineering, healthcare, and traditional Indian professions such as AYUSH practitioners and yoga instructors.
Domestic Reactions and Strategic Context
Commerce Minister Piyush Goyal highlighted that the FTA opens doors for Indian businesses and provides global opportunities for the youth. Commerce Secretary Rajesh Agrawal pointed out that the deal converges India's strengths in services and labour-intensive growth with New Zealand's need for predictable access to a large economy.
The agreement also includes cooperation in areas like AYUSH, culture, fisheries, and tourism, and addresses non-tariff barriers. Notably, India has kept dairy products on the exclusion list, protecting its domestic sector despite New Zealand being a major dairy exporter.
The deal, however, faced criticism in New Zealand from Foreign Minister Winston Peters, who called it "neither free nor fair" and expressed concerns over immigration concessions. Prime Minister Luxon, in contrast, defended it as a "big deal" that would create jobs and boost wages by providing better access to India's 1.4 billion consumers.
Trade experts like Ajay Srivastava of GTRI noted the inherent tariff asymmetry but emphasized the pact's strategic value. For India, it strengthens access to a rules-based Pacific market, while for New Zealand, it offers a foothold in one of the world's fastest-growing economies amid global trade uncertainties.
This agreement marks India's third FTA finalization this year, following pacts with Oman and the UK, showcasing a focused strategy to diversify trade partnerships and deepen economic integration in the Indo-Pacific region.
