India Insights: India–New Zealand Free Trade Talks Resume After Long Hiatus

After nearly a decade of diplomatic silence on trade, India and New Zealand have opened the door to negotiating economic relations between the two countries. The talks regarding the free trade agreement (FTA) first began in 2010 but then fell apart by 2015 amid disagreements over key sectors, including agriculture and migration. Now, the post-COVID world has reshaped the trade dynamics between the countries.

New Zealand’s Prime Minister, Christopher Luxon, met his Indian counterpart in New Delhi on 17th March and signed agreements on improving defense, pharmaceuticals, food processing, renewable energy, and critical minerals cooperation.

“New Zealand is committed to doing more with India across a wide range of areas — defense and security, trade and economics, people-to-people ties, education, tourism, sports and culture,” Luxon said at a joint press conference with Indian Prime Minister Narendra Modi.

India is a rapidly growing economy with an appetite for foreign investment, and New Zealand is eager to reduce its reliance on China. Hence, both countries can benefit from these new budding trade ties. But with persistent challenges on the table, one question remains: Can India and New Zealand move beyond past roadblocks and finally seal a mutually beneficial trade deal?

Background: A Decade Of Dormancy

Between 2010 and 2015, over ten rounds of negotiations took place between the two countries with no deals arising out of them. One of the primary sticking points was New Zealand’s push for greater access to India’s dairy market—an area India remains highly protective of, given the political sensitivities around its vast, small-scale dairy sector.

Since then, the countries have gone through major economic and political changes that have prompted adjustments in their diplomatic approach too. Not only with New Zealand, but India has also become increasingly open to bilateral trade agreements, notably signing successful deals with the UAE and Australia. These moves signal a shift in New Delhi’s once-cautious trade approach and may have reignited Wellington’s interest in revisiting the FTA.

As for New Zealand, India has become a lucrative trade partner, with it being the world’s fifth-largest economy.

The Motivations Behind the Relaunch

The shifting geopolitical trends have played a vital role in the revival of trade talks. However, for India, the motivation stems from a growing urgency to diversify trade partnerships beyond traditional allies in the West. Since souring relations with China, India has tried to become more self-sufficient to avoid dependency on its neighbour. New Delhi is pushing an export-led growth model under its ‘Atmanirbhar Bharat’ (self-reliant India) vision. Additionally, India’s increasing focus on the Indo-Pacific as a strategic and economic arena makes partnerships with regional players like New Zealand more relevant than ever.

For New Zealand, the reasons are similar. Nearly 30% of its imports are from China. The pandemic exposed vulnerabilities in overdependence, pushing Wellington to actively seek alternative markets. India, with its massive consumer base and rising middle class, presents a largely untapped economic opportunity.

New Zealand’s Trade and Export Growth Minister, Damien O’Connor, recently noted that "deepening trade ties with India is a key priority," signalling the government’s intent to show progress on its progressive trade agenda.

What’s On The Table?

India’s Union Minister for Trade and Commerce, Piyush Goyal, has said that amid the global trade war between the US and the rest of the world, the proposed trade pact between New Delhi and Wellington could expand business in many key sectors.

Dairy has remained a contested area under agriculture. New Zealand, a global leader in dairy exports, is expected to push for wider access to India’s massive dairy market. However, India has historically resisted such moves, citing the need to protect millions of small-scale dairy farmers who form the backbone of its rural economy. This remains a sensitive political issue, and one that previously stalled negotiations.

India’s booming IT sector presents a lucrative opportunity for collaboration too, especially in areas like cybersecurity and AI. New Zealand could benefit from India’s large talent pool and tech expertise, while India could tap into New Zealand’s innovation-driven R&D ecosystem.

Finally, sustainability and green tech have emerged as a shared priority. Both nations have expressed commitments to climate goals, and a trade deal could incentivize collaboration on clean energy solutions, carbon reduction technologies, and climate-resilient agriculture.

Possible Roadblocks Ahead

These renewed trade talks are a step towards an intent for partnership; however, the path to a successful FTA is not going to be smooth. Both India and New Zealand face domestic and geopolitical challenges that could complicate negotiations.

Tensions can flare up between India, China, and New Zealand. As global alliances shift due to changes in leadership around the world, New Zealand hopes to strengthen its relations with India, and that could upset some other countries. There’s also the broader issue of global economic instability. Ongoing conflicts, inflationary pressures, and supply chain disruptions have made governments more risk-averse. In this climate, pushing through a comprehensive trade deal requires not only economic logic but also political will and timing.

Ultimately, while both nations may be motivated, the FTA’s success will hinge on their ability to balance domestic sensitivities with long-term strategic goals—a tightrope neither has fully mastered in the past.

If the talks move forward, it would not only diversify the duo’s trade relationships but also set a precedent for how mid-sized economic powers can carve out strategic trade partnerships in an increasingly fragmented global landscape.

However, both countries remain optimistic. "India, New Zealand proposed FTA can expand trade by 10 times in 10 years," Piyush Goyal said, speaking at a gathering on 18th March.

Ultimately, this renewed effort underscores a broader trend in global diplomacy—mid-sized nations are finding creative ways to navigate uncertainty, proving that even in a world of shifting alliances, cooperation is still the best path forward.