India and New Zealand have officially commenced negotiations for a comprehensive Free Trade Agreement (FTA), aiming to strengthen economic ties between the two nations.
What is a Free Trade Agreement (FTA)?
An FTA is a trade pact between two or more countries designed to reduce or eliminate trade barriers, such as tariffs, import/export restrictions, and non-tariff barriers.
Key Features:
- Covers trade in goods (agriculture & industry) and services (banking, IT, construction, etc.).
- Advanced FTAs may also include provisions on investment, intellectual property rights (IPRs), government procurement, and competition policies.
Types of Trade Agreements:
- Partial Scope Agreement (PSA): Covers a limited number of goods.
- Free Trade Agreement (FTA): Reduces or removes tariffs between member countries while allowing independent external tariff policies for non-members.
- Customs Union: Establishes a common external tariff for non-members.
- Common Market: Allows free movement of goods, services, labor, and capital among member nations.
- Economic Union: Coordinates macroeconomic and exchange rate policies across member countries.
India-New Zealand Trade Relations:
- This agreement represents India’s second bilateral trade deal in Oceania, following the India-Australia FTA in April 2022.
- Trade Growth: In 2023-24, India exported goods worth $538 million to New Zealand while importing $335 million, resulting in a trade surplus of $203 million.
- Bilateral Trade: Trade between the two countries surpassed $1 billion between April and January 2025, reflecting steady economic growth.
- Trade Performance in 2024-25 (up to December 31):
- Indian exports to New Zealand increased by 21.49% to $496 million.
- Imports surged by 78.72% to $463 million, reducing the trade surplus to $33 million.