India–New Zealand FTA: Impact on Food, Textiles & Engineering Product Exports
India and New Zealand have reached an important point in their trade negotiations. Both countries have expressed an interest in working together on many more trade and economic issues beyond those linked directly to commodities. The India-New Zealand Free Trade Agreement (FTA) is viewed as a potential opportunity to access new export markets for both countries, as well as to allow for the diversification of supply chains to accommodate the rapidly evolving global trading environment. For many Indian exporters, particularly those who export food products, textiles and engineering goods, the FTA is expected to provide access to a broader range of markets in the Pacific region than they have enjoyed in the past. Through the FTA, India will reduce tariffs and align the commercial priorities of both countries while providing opportunities for regulatory cooperation and building a framework for long-term resilience in their trade relationship.
Why Does the India–New Zealand FTA Matter Now?
Timing is also important with regard to the recent development of FTAs since countries are currently reassessing their respective trading relationships as a result of factors such as trade fragmentation and the desire for a more stable and reliable partner in trade. As a result, there is mutual commitment between these two nations to increase both the quality and quantity of bilateral trade, and in doing so, to ensure that bilateral trade is based on rules, transparent and diversified across a number of different sectors.
From India’s perspective, New Zealand provides the opportunity to access a high-income, high-standard market along with additional access to the wider Oceania market; conversely, from New Zealand’s perspective, India represents a significant economic opportunity for New Zealand as an emerging economy with extensive manufacturing capabilities and large-scale exports. The FTA seeks to create a bridge between these two complementarities.
How Will the Agreement Influence Bilateral Trade Flows?
The agreement is expected to provide reduced tariffs and non-tariff barriers for many categories of goods, which should allow Indian manufacturers to make more price-competitive goods for New Zealand Consumers, and thus create additional supplier options for New Zealand importers.
This means that the trade volumes between India and New Zealand will move away from being heavily dependent on a small number of industries, and create a more diverse portfolio between the two nations. In order to achieve this goal, there are several factors that must be considered: More businesses participating in the trade between India and New Zealand, a greater amount of certainty concerning customs procedures, and more widespread acceptance of industry standards should all lead to more long-term contracts as compared to transactional trade.
What Are the Implications for Food and Agricultural Exports?
The exports of food products (particularly those from India) to New Zealand represent one of the key areas monitored within the scope of the India-New Zealand Free Trade Agreement (IAFT Agreement). In recent years, because of extensive investment into establishing a large scale production system for ensuring quality control of products from the Agri-food Sector of India, food exports from India have been gaining momentum.
A decrease in tariffs will likely increase the quantity of food products exported from India to New Zealand, including processed foods, rice-based products, spices, specialty ingredients and others to both Retail and Foodservice markets in New Zealand; however, Indian exporters will still have to collaborate with New Zealand on a regulatory basis to ensure they comply with New Zealand’s strict safety and label standards for imported food products. Indian exporters should focus on traceability, consistency and added value and not just on volume alone.
How Could Indian Textiles Benefit from the FTA?
India’s textile sector combines jobs and exportability. An FTA will reduce duty on yarn, fabric and finished garment imports from India relative to competitive suppliers in Asia.
Indian textiles are an increasingly cost-effective and easy to design for New Zealand buyers. The categories of textile products that could see increased demand include apparel, home textiles and technical fabrics, as long as sourcing time and compliance issues are streamlined under an FTA.
As a result, the engagement between Indian textile manufacturers and New Zealand retailers looking for diversification in sourcing could increase.
What Role Does Apparel Sourcing Play in This Trade Shift?
In a larger context, the FTA may have a positive impact on the way New Zealand apparel brands source apparel. With less trade friction, India has become a more attractive manufacturing location for mid-scale and premium categories.
Consequently, apparel sourcing companies who connect South Asia with Oceania have new opportunities to connect buyers with suppliers, private label production and custom fill runs. Over time, this may move the trade model from an exclusive export-import relationship to an integrated sourcing model.
How Will Engineering Goods Be Affected?
India’s Engineering Products represent one of the largest components of the country’s export revenues. Industrial machinery, Automotive components, Electrical Equipment and Fabricated Metal Products are the largest subcategories of engineering product exports from India.
Reduced tariffs and a simplified process for Technical Standards under an FTA may allow greater access for Indian Engineering Firms into New Zealand (particularly with regard to Infrastructure-related and Industrial Supply segments). On the other hand, Indian products will provide New Zealand with a lower cost source with similar Technical Capabilities.
The key challenge will be to establish a uniform system of Certification and Conformity Assessment Processes between both countries. It is here that Mutual Recognition Mechanisms could play a significant role.
Can Leather and Allied Products Gain from the Agreement?
While not often emphasized, Leather and Leather Products represent a small but growing category of exports from India. By lowering duties, the FTA could improve the competitiveness of Footwear, Accessories, and Finished Leather Goods.
Growth in Leather Goods Exports from India would likely take place incrementally, particularly in higher-value-added segments, where Design and Craftsmanship are more important than sheer volume. Issues regarding Sustainability and Ethical Sourcing will continue to be critical factors in determining the ability of these products to be accepted by the New Zealand market.
What Regulatory and Compliance Issues Will Shape Outcomes?
The existence of market access does not equal the successful exportation of goods. For example, New Zealand sets very stringent standards on the things that have to do with biosecurity, labour compliance and environmental impacts. Therefore, Indian exporters will have to meet the standards necessary to take advantage of the benefits of the FTA between the two countries.
Another factor determining how effective the FTA will be is the extent to which it can overcome non-tariff barriers like potential documentation, inspection-protocols and dispute-resolution mechanisms. Information sharing and building the capacity of exporters, particularly for small and medium sized exporters, is going to be critical for Indian exporters to take full advantage of the benefits of the
Are There Risks and Adjustment Costs Involved?
FTA offers an opportunity for both Countries, but it also brings with it pressures that require adjustments to be made by both domestic industries in each Country that will more than likely result in enhanced productivity and innovation due to the increased competition they are facing.
While there will be a significant barrier to entry into the Indian market for many NZ exporters due to volatility of the rupee against the NZ dollar; high freight costs; and compliance costs to be incurred by NZ exporters, when considered with the potential for the long-term benefits of the FTA, Indian exporters who put a strong emphasis on viewing the FTA as a long-term strategic opportunity instead of an immediate short-term financial gain, will be able to adapt much quicker than those companies that only look at the short-term gains available through the FTA.
How Might the FTA Reshape Long-Term Trade Strategy?
The long-term opportunities created by this agreement may also encourage Indian exporters to think of New Zealand not just as an end market for their products, but as a part of their overall regional strategy. The establishment of distribution agreements, local warehousing, joint ventures, etc., establishing more direct supply chains, will all become more viable as trade volumes increase.
Likewise, the FTA will give New Zealand companies an opportunity to develop a deeper, long-term relationship with Indian suppliers, potentially resulting in more collaborative product development, and greater sourcing diversification.
Conclusion
The proposed India-New Zealand Free Trade Agreement (FTA) isn’t simply a bilateral trade agreement; rather, it signals the joint commitment of both countries to establish robust, diverse, and accessible economic linkages. Both nations view this agreement as an opportunity to enhance the ability of exporters in India to access new markets by removing logistical barriers as well as raising expectations as to what each country expects of their goods in terms of quality and regulatory compliance.
The success of this agreement is contingent upon how well it is implemented. In particular, matching the tariff benefits provided through the FTA with regulatory cooperation between the two countries and the business readiness of exporters from India will be key factors. If managed properly, the FTA has the potential to shift the trade relationship between India and New Zealand in a manner that promotes long-term value as opposed to short-term gains.
Frequently Asked Questions (FAQ)
To expand bilateral trade by reducing tariffs and improving regulatory cooperation.
Food products, textiles, engineering goods, and select leather exports.
No, but it aims to significantly reduce both tariff and non-tariff barriers.
Critical, as New Zealand enforces high standards across imports.
It is primarily designed for long-term strategic trade expansion.
