Members of Prime Minister Christopher Luxon’s delegation are celebrating the success of his official visit to India, while warning the Government not to lose momentum.
New Zealand had developed a reputation in India as a transactional player, only interested in gaining access to a lucrative market. The country’s collective memory of exploitation by the British Empire makes it particularly wary of that kind of approach.
The previous attempt at a trade deal failed for several reasons, but a key factor was the lack of trust and a shortage of things to talk about besides trade. India saw little motivation to make a deal happen.
Diplomats and ministers leading a fresh push for a trade deal have taken a different approach. A 2020 strategy document set out a five-year plan to foster a deeper relationship, emphasizing sport, culture, and people-to-people ties.
Since taking office in 2023, Trade Minister Todd McClay and Foreign Minister Winston Peters have dedicated significant time and effort to India. Unlike in the mid-2010s, there is now much more for India and New Zealand to talk about.
Both countries share concerns about China’s growing influence and are looking to strengthen defense and economic partnerships as a counterbalance in the Pacific and Asia. As a rising power itself, India wants New Zealand to leverage its diplomatic clout to boost India’s global recognition.
As India has grown in size and confidence, it has become more open to liberalizing its economy. The country has signed a series of trade deals in recent years, including one with Australia.
New Zealand is home to a large and loyal diaspora of Indian citizens who have been lobbying both governments for closer diplomatic ties and personally building networks between the two nations for years. A shared passion for cricket and sport is another thread connecting the two countries.
All of this means the possibility of a trade deal now falls on much more fertile ground than when John Key’s government tried and failed between 2011 and 2016. Perhaps we shouldn’t have been so surprised when an agreement to restart talks was reached on day one.
Swing for the fences
One diplomat described it as hitting a boundary on the first ball, one of what felt like hundreds of cricket references throughout the trip. Almost every speech included a mention of India winning the Champions Trophy, followed by a retort that they lost to the Black Caps in the test series.
Luxon played cricket for the cameras twice: first in a street cricket game with underprivileged kids in New Delhi, and later at the iconic Wankhede Stadium in Mumbai. Both times backed up by professional players Ross Taylor and Ajaz Patel.
He called it "cricket diplomacy" and used the Black Caps’ star power to draw attention to the trip, helping Kiwi companies secure facetime with key Indian business contacts. Market access for service-based businesses relies more on social networks than free trade agreements.
Free trade is most crucial for goods exporters. India imposes eye-watering tariffs on New Zealand goods, with some rates reaching as high as 150%. For example, most wine in a typical local bottle shop in New Delhi was priced between NZ$30 and NZ$70 due to the import tariff.
Nathan Guy, the chairman of the Meat Industry Association, said New Zealand’s sheep meat faces an effective tariff rate of 33%, while Australians pay zero.
“At the moment we are fighting in this market with one hand tied behind our back,” he said.
Dairy products face a tariff of 37.5%, and kiwifruit is hit with a 33% tariff. Without a free trade agreement, exporters in these sectors struggle to compete with the growing number of countries that have secured better access.
Luckily, a deal appears likely. Those traveling with the Prime Minister describe it as a foregone conclusion, focusing only on what will be included in the deal and how long it might take to finalize.
People familiar with India’s political system say its visible enthusiasm is genuine, though it will still drive a hard bargain in negotiations, knowing it holds the stronger hand.
Trade deal trade-offs
Ajay Srivastava, from the Global Trade Research Initiative, noted in a report that New Zealand’s average import tariff is just 2.3%, with more than half of its individual items already duty-free.
“In contrast, India’s average tariff stands at 17.8%, meaning it would have to make significant reductions, making a traditional FTA less attractive for India,” he said.
This is why issues like easier movement for skilled professionals, better access for its IT and services sector, and diplomatic support are crucial for the Indian side.
New Zealand’s dairy industry expects to be included in any deal, but Kiwi negotiators are unlikely to secure full access for commodity products like milk powder.
While the industry is too small to overwhelm India’s massive market, Indian officials are cautious about taking the political risk or setting a precedent that other trade partners might later demand.
Instead, there is speculation that tariffs on specific dairy items—such as whey powder and mozzarella cheese—could be lowered, or that broader dairy tariffs could be phased out over a longer time horizon.
Trade expert Srivastava noted that India is reluctant to risk its domestic dairy industry, but pressure from the US to open up its dairy and agricultural sectors may influence the negotiations.
“While India may consider limited imports of value-added dairy products, it remains firm against allowing raw dairy imports,” he wrote.
Show me the money
Dairy may no longer be a deal breaker for New Zealand. The Indian economy represents such a massive opportunity for other sectors that it wouldn’t make sense to throw everything away over dairy.
Research by S&P Global Ratings predicts that Asia-Pacific's growth engine will shift from China to India and Southeast Asia. India was likely to grow at close to 7% each year, while China would struggle to hit its 5% target. For context, New Zealand is forecast to grow just 2.5%.
“We expect India to grow 6.7% per year from fiscal 2024 to fiscal 2031, catapulting GDP to $6.7 trillion from $3.4 trillion in fiscal 2023. Per capita GDP will rise to about $4,500,” the analysts wrote.
The Indian consumer market is expected to more than double by 2031, rising from $2.3 trillion to $5.2 trillion, driven by population growth and increasing household incomes.
Higher real incomes will boost discretionary spending in areas such as entertainment, communications, restaurants, and hotels. Spending on food alone is expected to rise to $1.4 trillion by 2031.
It’s a huge opportunity for New Zealand, which already manages to sell kiwifruit, apples, Mānuka honey, and sheep meat to India despite the steep tariffs.
India will want something in return for this prize. Prime Minister Narendra Modi has said he would move quickly toward an agreement to make it easier for skilled professionals to move between India and New Zealand.
However, this could be a hard sell, with NZ First generally opposed to liberal immigration rules and many countries around the world facing a backlash against high levels of migration.
Difficult geopolitics
Another contentious issue was Modi’s request for New Zealand to take action against the Khalistan movement, which advocates for a Sikh-majority state within Hindu-dominated India.
India has been accused of assassinating an activist involved in organizing a makeshift referendum in Canada. Modi stated that he had raised concerns with Luxon about the group’s activities in New Zealand.
“We will continue to cooperate in taking action against terrorists, separatists, and radical elements. In this context, we have shared our concerns about some illegal elements in New Zealand.”
“We are confident that we will continue to receive the support of the New Zealand government in taking action against these illegal elements,” he said.
Speaking to the media later in the day, Luxon said the group would be allowed to exercise its right to free speech, as long as it did so within the limits of the law—which, as he noted, it appears to be doing.
India also wants New Zealand’s support in its bid to join the Nuclear Suppliers Group and secure a permanent seat on the United Nations Security Council, and was given symbolic gestures of backing.
While Luxon did an excellent job of building rapport with Modi and top Indian officials, his tough stance on China did not go unnoticed by New Zealand's largest trading partner.
He made multiple references to China as a security threat in a speech at the Raisina Dialogue security conference, including mentioning the three Chinese warships that sailed past New Zealand.
Chinese Ambassador Wang Xiaolong suggested that New Zealand had damaged its relationship with China in its eagerness to strengthen ties with India.
“It hardly serves your best interests when you try to promote one significant relationship by damaging another,” he wrote in a post on social media.
The truth is that securing an FTA with India is partly about managing New Zealand’s overreliance on China. Meat and dairy exporters cannot significantly scale up production to serve the Indian market; instead, they would likely redirect some of their existing supply.
This may result in export growth by value if exporters can fetch a higher price, or simply reduce the risk of disruption in the event of a trade war or military conflict.
Higher-growth areas like technology and professional services are much less dependent on a free trade agreement to succeed, although the governments' relationship still plays a key role.
Don’t stop now
Sunil Kaushal, the President of the Waitakere Indian Association, said that, overall, this had been the best Prime Minister-led trip to India during the decades he’s been advocating for a closer relationship.
“McClay deserves to be given a big pat on the back for the amount of work he’s done and the energy he has put into the relationship,” he said.
“We, as New Zealand, have to recognize that India is not what it was 20 years ago. We have to give India the respect it deserves on the national and international stage”.
But Kaushal had a word of warning for both the government and the community: “Don’t drop the ball.”
“Just getting on the plane, coming and selling your meat, your apples, your pears, your avocados, and then going back, that doesn't work out,” he said.
Another person familiar with the relationship said New Zealand needed to stop “rediscovering” India every five years and prove it can be a stable partner.
Standing on a cricket pitch in Mumbai, Luxon told traveling media that the intense focus on the India–New Zealand relationship was both sustainable and necessary.
“When you’ve got the third biggest economy, the largest population, a consequential power in a multipolar world, and strong people-to-people links … it's a world of endless opportunity.”
18 Comments
It seems to be that realistically India has little need of anything New Zealand except perhaps as alluded to here as a small ally in perhaps the sense of the history of the Commonwealth. India has been butting heads with China on their border. China has obtained, by a good degree economic stealth, a huge swathe of interest and influence, Myanmar, Pakistan, Afghanistan, Iran, Syria all of which surrounds the sub continent and Sri Lanka is heavily indebted to China. So it is understandable that India would think to count on a framework of its let’s say, traditional allies.
Seems to me to be something ofa deal for the sake of saying we got a deal rather than any net benefit to NZ, especially when there appears an expectation that we will free up migration from the worlds most populous country. A quick look at NZs exports to India dosnt inspire great expectations of growth when the top 3 exports are a loss making product from an industry in terminal decline (wool) and scrap metal.
https://oec.world/en/profile/bilateral-country/nzl/partner/ind
Don’t focus on the existing export profile as it is heavily warped by tariffs. If they were lifted or lessened we’d be able to export a different set of stuff. That’s the whole point of a trade deal. One company is selling lamb there but since there is a 33% premium they can only sell to mega high-end market that isn’t price sensitive. That would change if tariff was lifted.
Yes that’s the basic point. You need to first get the ball free and if you don’t drop it in the process, then you can start making play with it
With an average income of 300 to 400 NZD per month in India I suspect the removal of tarrifs will provide little improved market access outside of the mega high end market given our comparatively high cost structures.
The top 1 per cent earn on average 23 times the average Indian. 1% of a population of 1,463,865,525 is a big market.
Dont dispute that, but would suggest that the tarrifs are not a factor in that sector of the market...there may be a potential rise in competitiveness with the Australians in that sector given they have a deal already but their exports to India are quite different given their mineral resources.
Eating an Elephant starts with the first Bite....
Maybe not an appropriate metaphor.
Maybe not....but lol anyway.
Given ours is already a comparatively open access market the question that is begged is what have we given away for a marginal (if the Australian FTA is any example) improvement in access to the Indian market?
I work in IT, funny that, we employ lots of Indians on and offshore. NZers are not available in these fields as much.
So we do have a need for these skills.
I would suggest there is currently little in the way of restriction on NZ accessing Indian IT skills....we may be outbid by the likes of the US and OZ but a FTA hardly changes that dynamic.
Tata bid a lot . Tech lead onshore in Auckland with team in India
And that confirms my point
'We expect India to grow 6.7% per year from fiscal 2024 to fiscal 2031, catapulting GDP to $6.7 trillion from $3.4 trillion in fiscal 2023. Per capita GDP will rise to about $4,500,” the analysts wrote.'
How about quoting someone reporting reality, Dan? Do you actually understand exponential math? And what that would entail in resource terms? It is a physical impossibility, ex all other nations reversing, or massive inflation.
As for Luxon, I enjoyed every episode of Utopia.
The difference is, they knew they were taking the p.
Kiwifruit and lamb would be a good place to start.
The suggestion of whey powder as a category within dairy is questionable. We are actually importers of cheap whey which we add to whole milk powder for fascinating reasons which I won't go into here. But the idea of focusing on specific products within dairy is a good one.
KeithW
Recall an entertaining discussion with Mike Moore explaining why his “lamburgher” would never fly but a more interesting direction would be for the trade to look no further than the success of ANZCo in its formative stage of supply to Japan and Sth Korea of mutton and lesser lamb cuts forequarters etc. Established very efficient boning and processing in the market as a reliable and useable form of protein.
The history of ANZCO over close on 50 years is indeed very interesting.
KeithW
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