India-New Zealand Strengthen Ties Following Christopher Luxon’s Visit To India – Analysis

New Zealand Prime Minister Christopher Luxon paid a four-day visit to India from 16 to 20 March 2025, during which a series of agreements were signed to strengthen cooperation between the two countries.

The highlight of the visit was the launch of talks for a Free Trade Agreement (FTA) as part of efforts to deepen economic cooperation amid the threat of a global tariff war sparked by the US President Donald Trump. The discussions were led by Commerce and Industry Minister Piyush Goyal from the Indian side and Todd McClay, Trade and Investment Minister from the New Zealand side. This marked a step towards strengthening bilateral relations. The move to resume negotiations also reflects India’s strategy to diversify trade partnerships with partner countries.

During John Key’s government in New Zealand, India and New Zealand began negotiating the Comprehensive Economic Cooperation Agreement (CEPA) in April 2010 to boost trade in goods and services, and investment. Negotiations ran for six years before being put on ice. It was reported that India would not budge on dairy access, while New Zealand was unwilling to offer enough work visas. After nine months of discussions and ten rounds of negotiations, the talks stalled in February 2015 due to disagreements over market access and trade priorities. With the resumption of FTA negotiations, both sides aim to achieve balanced outcomes that enhance supply chain integration, potentially unlocking new business opportunities and improving market access.

The strategic move to resume negotiations is part of India’s broader effort to diversify its trade partnerships and reduce its dependency on traditional markets. India’s Commerce Ministry observed: “The India-New Zealand FTA negotiations aim to achieve balanced outcomes by enhancing supply chain integration and improving market access. This milestone reflects a shared commitment to strengthening economic ties, fostering resilience, and promoting mutual prosperity”.

The seriousness of the New Zealand side to chalk up an early win can be deciphered from the fact that Trade Minister McClay had travelled ahead of the delegation and spent the day thrashing out how the two sides might be able to work through issues which stalled the previous round. As it transpired soon, the agreement appeared to be a genuine breakthrough with Luxon’s meeting with India’s top diplomat S. Jaishankar acting as a crunch point for a final decision.

In any FTA negotiations, concessions on tariffs always remain a sensitive issue and therefore confidentiality was maintained in releasing the details to the media immediately. Since the tariff rates imposed by both sides on the imports from either side has a huge gap, McClay was reluctant to reveal how he had convinced the Indian negotiators the talks would not end in another stalemate.

Because of the past experience, McClay said that this was a fresh set of negotiations and not a continuation of the process. This meant many rounds of talks shall start afresh, the first being scheduled to be in April. The dairy industry is a very sensitive one for New Zealand and it would weigh what future benefits would accrue if a deal is reached with India on this. Dairy will be challenging and New Zealand negotiators are aware of this. Its negotiators could be keeping some cunning plans closer it their chests to position New Zealand as an import option for the future should India’s supply and demand balance shifts. This could mean making sure New Zealand was not disadvantaged relative to competitors or committing to a review in the future — when India’s dairy industry has had time to modernise.

As regards the composition of trade commodity, New Zealand’s trade basket primarily centres on agricultural products, education services and technology. The country exports dairy products, wool, and fruits to India, while India exports pharmaceuticals, textiles, and information technology services to New Zealand.

Though the Commerce Minister Piyush Goyal expressed optimism that FTA negotiations, when succeeded, shall unlock new opportunities for businesses and consumers, fostering mutual growth and prosperity for both nations, the challenges would be much more on India as its average tariff stands at 17.8 per cent as against 2.3 per cent imposed by New Zealand. This means India would have to make significant reductions, making a traditional FTA less attractive for India. As talks resume, both countries will need to find common ground on these issues to move forward successfully. According to think tank Global Trade Research Initiative (GTRI), a major challenge in the renewed talks will be the disparity in tariff structures.

The key issues both nations would face while negotiating a comprehensive FTA include New Zealand’s push for dairy access, which India resisted to protect its farmers. India also opposed lowering tariffs on dairy, meat, and wine, while New Zealand denied India’s request for better access for its professionals. Currently, India’s dairy imports from New Zealand are minimal, around $0.57 million. While India may consider limited imports of value-added dairy products, it remains firmly against allowing raw dairy imports. Earlier, India sought easier movement for skilled workers and better terms for its IT and services sector, but little progress were made.

India’s key goods exports to New Zealand include clothing, fabrics, and home textiles; medicines and medical supplies; refined petrol; agricultural equipment and machinery such as tractors and irrigation tools; auto; iron and steel; paper products; electronics; shrimps; diamonds; and basmati rice. The main imports are agricultural goods, minerals, apples, kiwifruit, meat products such as lamb, mutton, milk albumin, lactose syrup, coking coal, logs and sawn timber, wool, and scrap metals.

Earlier, India wanted New Zealand to grant work opportunities similar to those given to Australia and China, but New Zealand did not agree. The FTA talks got complicated as both countries were part of the negotiations around the Regional Comprehensive Economic Partnership (RCEP), which India eventually withdrew from in 2019 due to certain concerns about market access and protecting local industries.

While New Zealand would want greater market access in India, particularly in dairy, food processing, and technology, India would seek greater access for its agricultural products, textiles, and information technology services. To realise this, both sides are expected to focus on reducing tariffs, ease investment restrictions, and develop a framework for deeper economic engagement. India is likely to seek early market access for its grape exports to New Zealand, along with approval for vapour heat treatment (VHT) facilities in Delhi and Lucknow, which are used to eliminate pests.

As India’s economy continues to grow, its economic connectedness with its economic partners world-over gets a further boost. The FTA push with New Zealand is therefore to recalibrate its trade strategies to boost exports and diversify supply chains. India has already signed FTAs with several countries, such as Japan, South Korea, Australia, and the European Free Trade Association (EFTA) in the past few years. These deals have facilitated increased trade flows, investment, and economic cooperation between the signatory countries. New Delhi is also negotiating FTAs with Oman, and economic blocs ASEAN and the European Union, among others.

The total size of bilateral trade is miniscule. According to data from the commerce ministry, India’s exports to New Zealand in fiscal 2024 dipped by 1.73 per cent to $538.33 million, while imports from New Zealand dropped by 28.89 per cent $335.1 million. The total bilateral trade remaining at just $1.54 billion meant a decrease by 14.82 per cent from the previous fiscal to $873.47 million signifying a significant under-performance in economic ties. It thus transpires that both countries have yet to tap into their true trade potential.

In fiscal 2024, India’s services exports to New Zealand stood at $ 214.1 million, while New Zealand’s services exports to India totalled $ 456.5 million. India’s key services exports include IT and software services, provided by companies such as Infosys and HCL, along with telecommunications services to support New Zealand’s digital infrastructure. India also exports healthcare services, including medical tourism, pharmaceutical research, and telemedicine. Financial services are another important area, with Indian banks and fintech companies offering digital payment solutions.

New Zealand’s services exports to India are led by education services, with thousands of Indian students pursuing higher education in New Zealand. Tourism services are also significant, as Indian tourists are drawn to New Zealand’s natural landscapes and adventure activities. New Zealand provides fintech services, offering digital solutions to India’s financial sector, and specialised aviation training programmes for pilots and cabin crew. Additionally, New Zealand firms offer niche IT services such as data analytics and automation solutions.

India has realised that over 35 million Indians resides around the world and leveraging this human capital has been an important diplomatic tool for the present Modi government. Indians are the biggest source of skilled migrants, the third largest ethnic group and the second-largest source of international students in New Zealand. Indians make up around 5 per cent of the New Zealand population and the approximate population of Indians in New Zealand in 2025 is 2.80 lakh. However, as a co-panelist with the author at the Sansad TV discussion on India-New Zealand relations on 17 March, former High Commissioner to New Zealand Sanjeev Kohli shared that in Auckland alone, the number of Indians has crossed 300,000. Latest census data reveals the Indian population has leapfrogged the Chinese community to become the third largest ethnic group in New Zealand after the European ethnic group and the Maoris. It is therefore appropriate that India leverages this human capital for deepening people-to-people contact and strengthen bilateral ties.

Raisina Dialogue

Luxon’s India visit was timed when Indian Prime Minister Narendra Modi opened the three-day Raisina Dialogue from 17-19 March 2025, India’s flagship conference on geopolitics and geo-economics. This 10th edition of the conclave was attended by delegates from 125 countries. New Zealand Prime Minister Luxon, US Director of National Intelligence Tulsi Gabbard and Ukrainian Foreign Minister Andrii Sybiha were the prominent ones those participated. In a first, a delegation, including a senior security official, from Taiwan also attended the deliberations reflecting growing cooperation between the two sides in the last few years.

The Raisina Dialogue was hosted by the leading think-tank Observer Research Foundation (ORF) in partnership with the Ministry of External Affairs (MEA). The theme of this edition of the Dialogue was “Kalachakra – People, Peace and Planet”. Luxon delivered the keynote address at the inaugural session on 17 March, the first time a speech made by a non-European leader. Luxon, whose National Party won the 2023 election, blamed previous Labour Party governments for failing to nurture trade with India.

Defence Cooperation

Besides the decision to resume FTA negotiations, the signing of a defence pact marked a significant milestone of Luxon’s India visit. The pact was signed to bolster defence cooperation with an eye on ensuring an open and stable Indo-Pacific. Both sides decided to strengthen and institutionalise the defence and security partnership. Along with joint exercise, training and port visits, both sides decided to draw a roadmap for cooperation in the defence industry. The navies of both countries are working together in Command Task Force -150 for maritime security in the Indian Ocean. It is a multi-national unit currently led by New Zealand, which protects trade routes and counters piracy and terror in the Indian Ocean. Prime Minister Modi stressed that the two sides support a free, open, secure and prosperous Indo-Pacific and believe in the policy of development, not expansionism. The remarks against the backdrop of concerns over China’s aggressive behaviour across the region resonate in the entire region.

The MoU on defence cooperation described by Indian officials as a large omnibus pact, will establish regular engagements such as joint training and ship visits. The two sides already have an agreement for exchanging information on white shipping.

As part of the discussion on security cooperation, Prime Minister Modi raised anti-India activities of pro-Khalistan elements in New Zealand. As in the case of Canada, the UK and the US, these elements have organised anti-India protests and sought to target Indian diplomats, albeit on a smaller scale. Overall, Prime Minister Luxon’s visit to India opens a new chapter in India-New Zealand relations.