​Compounding gains: On the India-New Zealand FTA

The India-New Zealand FTA represents a strategic shift in India's trade policy. Historically hesitant about FTAs due to fears of domestic industry being overwhelmed, India is now actively negotiating agreements (like with the UAE, Australia, and EFTA nations) to secure market access and diversify supply chains. This strategy, known as 'China Plus One', aims to reduce reliance on China for imports (currently ~16% of India's total) and mitigate risks associated with over-dependence on a single export market, especially amid global uncertainties like potential US tariff hikes under the administration of Donald Trump. The immediate removal of tariffs by New Zealand provides a direct boost to Indian exports, improving their competitiveness. A key feature is the inclusion of investment facilitation clauses, mirroring the Trade and Economic Partnership Agreement with EFTA, where New Zealand has committed to facilitating $20 billion in investments over 15 years. This highlights a shift from focusing solely on goods trade to a more comprehensive approach that includes capital flows to boost domestic manufacturing and job creation.

This FTA is a crucial component of India's broader geopolitical strategy to deepen ties with the Indo-Pacific region and key Western allies. By concluding deals with nations like New Zealand, Australia, and the UK, India is strengthening its economic linkages with countries that share concerns about an increasingly assertive China. These agreements act as economic anchors, reinforcing strategic partnerships. The successful negotiation, particularly India's ability to protect sensitive sectors like dairy (a major New Zealand export interest) while securing immediate tariff elimination, demonstrates India's growing negotiating clout and pragmatism. It shows a willingness to engage in trade liberalization on its own terms, balancing domestic political sensitivities with the need for global integration.

The implementation of this FTA highlights the evolving role of the Indian state in facilitating international trade and investment. The commitment to create a dedicated desk to address issues faced by New Zealand investors signifies a move towards proactive governance and investment facilitation. This aligns with broader initiatives like Ease of Doing Business reforms, recognizing that regulatory bottlenecks and bureaucratic hurdles often deter foreign capital. To fully capitalize on FTAs, the government must address the 'sticky problem' of scaling up domestic manufacturing. This requires tackling deep-rooted issues related to infrastructure, logistics costs, labour laws, and access to credit, ensuring Indian firms are competitive enough to leverage the newly opened markets.