Trading Up Southwards
- Dr. V.L. Dharurkar

- Jan 8
- 3 min read
India’s free-trade pact with New Zealand is less about tariffs than about anchoring New Delhi more firmly in an unsettled Indo-Pacific.

India’s recently concluded free-trade agreement (FTA) with New Zealand, negotiated with unusual speed and diplomatic intent, marks another step in India’s quiet but consequential reorientation towards the Indo-Pacific. After deals with Australia and Britain, this pact extends India’s commercial arc deeper into the Pacific’s southern reaches, binding economics to strategy at a moment when global trade is fragmenting and geopolitics is intruding into supply chains.
By this pact, New Zealand will eliminate duties on virtually all Indian exports, offering immediate zero-duty access for labour-intensive sectors such as textiles, leather, footwear, engineering goods and jewellery. In return, India will lower tariffs on selected New Zealand exports including wool, coal, seafood and niche agricultural products while carefully shielding its politically sensitive dairy and farm sectors. Both sides have promised to double bilateral trade within five years and to channel long-term investment flows, particularly into Indian manufacturing and services.
Deeper Significance
Yet to read the pact narrowly is to miss its deeper significance. This agreement is part of India’s broader attempt to reposition itself as a credible economic pole in the Indo-Pacific and an alternative partner for middle powers unsettled by America’s tariff tantrums and wary of China’s economic coercion. New Zealand, a small but sophisticated economy with deep ties to Western markets and Asia alike, fits neatly into this design as it is commercially open, strategically trusted, and unburdened by historical baggage.
Trade, in this context, becomes diplomacy by other means. Since America’s turn towards protectionism under Donald Trump, many countries have sought diversification rather than dependence. As Europe looks East and the Pacific hedges, India has tried to seize this moment by replacing its once-defensive trade posture with selective openness.
The Commerce Ministry led by Piyush Goyal has pursued a ‘trusted partners’ strategy with fewer deals, faster negotiations and clearer red lines. The nine-month sprint to conclude talks with Wellington reflects this new pragmatism.
Services, which is India’s strength, loom large in the pact as the agreement opens pathways for cooperation in information technology, artificial intelligence, digital public infrastructure and education. India’s experience with platforms such as digital health systems, e-governance tools and AI-enabled language technologies offers New Zealand an inexpensive route to modernisation. For India, the payoff lies in embedding itself in the value chains of advanced economies.
A new visa pathway for Indian professionals, particularly in IT, engineering and healthcare is a case in point. As Europe ages and the Pacific economies confront skills shortages, India has positioned itself as the world’s skills reservoir. The agreement also allows for reciprocal movement, enabling New Zealand specialists in agriculture and dairy technology to work in India, transferring know-how without threatening domestic farmers.
This caution around agriculture is politically telling as India’s trade liberalisation today remains calibrated and not doctrinaire. By excluding sensitive dairy imports and maintaining tariff walls where livelihoods are at stake, New Delhi has signalled that globalisation will proceed on its terms. This balancing act of opening outward while protecting inward is central to the Modi government’s economic nationalism, and one reason India’s trade diplomacy has avoided the domestic backlash seen elsewhere.
The pact’s softer dimensions are no less deliberate. People-to-people ties receive unusual prominence. Nearly 300,000 people of Indian origin now live in New Zealand, shaping its food habits, cultural rhythms and labour market. Cricket, too, is pressed into service as diplomacy’s unlikely handmaiden, reinforcing familiarity where treaties alone cannot.
Strategically, the deal fits into a larger Indo-Pacific jigsaw. India has stayed out of mega trade blocs such as the Regional Comprehensive Economic Partnership (RCEP), wary of Chinese dominance. It has built a latticework of bilateral agreements with like-minded states like Australia, Japan, Britain and now New Zealand in an attempt to create resilience without being entangled. This multi-alignment through markets mirrors India’s broader foreign policy of avoiding camps but deepening its partnerships.
The India–New Zealand FTA will not transform global commerce. Its volumes are modest and its ambitions are measured. But in an era of weaponised trade and geopolitical mistrust, modesty is a virtue. The agreement signals that India is open, but selective and ambitious, but anchored in domestic realities. Above all, it shows that India now sees trade not as a concession extracted under pressure, but as an instrument of power patiently deployed.
(The writer is a foreign affairs expert. Views personal.)





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