India-New Zealand FTA from October 20: What gets cheaper and what the trade deal means

The India-New Zealand Free Trade Agreement (FTA) is set to come into force on October 20, opening a new chapter in economic ties between the two countries. From lower tariffs on select New Zealand products entering India to duty-free access for Indian exports, the agreement is expected to gradually reshape bilateral trade.

For Indian consumers, the most visible impact could eventually be felt in imported products such as kiwi fruit, apples and Manuka honey. However, the agreement does not throw open the Indian market across the board. Sensitive sectors, including dairy and several agricultural products, remain protected.

Here is what changes under the agreement and why it matters.

Which New Zealand products will face lower tariffs?

India has agreed to reduce or eliminate tariffs on around 70 per cent of its tariff lines covering imports from New Zealand.

Some products will receive immediate duty-free access. These include wood, wool, sheep meat and raw hides.

For several other categories, the reduction will be phased in rather than implemented at once. Tariffs on products including petroleum oils, vegetable oils, malt extract and specified electrical and mechanical machinery will be lowered over periods ranging from three to 10 years.

This means the impact on retail prices is unlikely to be uniform or immediate. While eliminating or reducing customs duties can lower import costs, the final price paid by consumers will also depend on factors such as international prices, freight, exchange rates, distribution costs and retailers’ margins.

What happens to kiwi fruit and apples?

Rather than allowing unrestricted imports at sharply reduced duties, India has created tariff-rate quotas for some agricultural products. These allow specified quantities to enter the country at lower or zero tariffs while retaining safeguards around larger volumes.

Kiwi fruit is one of the notable beneficiaries. In the first year of the agreement, up to 6,250 tonnes of New Zealand kiwi fruit will be eligible for duty-free entry into India. The quota will progressively rise to 15,000 tonnes by the sixth year.

The concession, however, will be subject to conditions including a minimum import price and seasonal requirements.

Apples will receive a different form of tariff relief. The initial quota has been fixed at 32,500 tonnes, rising to 45,000 tonnes by the sixth year.

Imports within this quota will attract a 25 per cent duty, half the prevailing 50 per cent tariff. Here too, minimum import prices and seasonal conditions will apply.

The quota mechanism allows India to provide greater market access to New Zealand while limiting the potential impact of cheaper imports on domestic fruit growers.

Will Manuka honey become cheaper?

New Zealand’s Manuka honey will also receive preferential treatment under the trade agreement.

It currently attracts an import duty of 66 per cent in India. Under the FTA, tariffs on specified quantities will be progressively reduced over five years.

Lower duties could make the premium honey more competitively priced in India, although the extent of any reduction at the retail level will depend on how much of the tariff saving is passed on to consumers.

Albumins are among the other products covered by tariff-rate quotas under the agreement.

What has India kept outside the deal?

One of the important aspects of the agreement is what India has chosen not to liberalise.

Dairy, a particularly sensitive area for India because of the large number of farmers dependent on the sector, has been kept outside the tariff concessions. Certain other agricultural products have also been excluded.

The exclusions indicate that the FTA has been structured to expand trade while retaining protection for sectors considered vulnerable to import competition.

What does India gain in New Zealand?

The agreement is not primarily about New Zealand goods entering India. Indian exporters are set to receive duty-free access to New Zealand across all tariff lines.

That could improve the competitiveness of Indian products in sectors including textiles and garments, leather and footwear, gems and jewellery, engineering goods and processed foods.

Removing customs duties makes Indian products cheaper relative to competing imports in the New Zealand market, potentially creating opportunities for exporters seeking to expand their presence there.

The scale of the opportunity will, however, depend on how effectively Indian businesses use the preferential access and whether they can meet New Zealand’s regulatory, quality and market requirements.

What does the FTA mean for investment and bilateral trade?

Trade is only one part of the broader economic relationship envisaged under the agreement.

New Zealand has committed to investments worth USD 20 billion in India over the next 15 years. The two countries have also set themselves the goal of doubling bilateral trade by 2030.

The FTA was signed on April 27 by Commerce and Industry Minister Piyush Goyal and New Zealand Trade and Investment Minister Todd McClay.

Once it takes effect on October 20, the changes will unfold in stages. Some tariffs will disappear immediately, while others will decline over several years and certain agricultural concessions will remain subject to quotas and safeguards.

For consumers, that could eventually mean greater availability and more competitive prices for selected New Zealand products. For Indian businesses, the larger opportunity lies in gaining tariff-free access to the New Zealand market — while sectors considered sensitive at home continue to remain protected.