India trade deal still ‘aspirational’ despite NZ push

Comment: The viability of the Government’s plan to negotiate and sign a free trade deal with India by the end of its first term in power may be questionable, but there is no denying its energy in pursuing the highly ambitious goal. 
Trade Minister Todd McClay is in India this week for a range of trade and agriculture meetings, his third visit to the country since the coalition took office last November and fifth in-person meeting with Indian commerce and industry minister Piyush Goyal.
McClay and his officials have been laying the groundwork for a planned visit by Prime Minister Christopher Luxon later this year, where he will be surely hoping to make an announcement of substance regarding trade talks – even simply that they have officially restarted, almost a decade since the last round of formal negotiations in 2015.
But it was a visit in the other direction, by Indian President Droupadi Murmu last week, that gave some indication of how viable that may be.
India’s presidency is a largely ceremonial role, but Murmu’s time in New Zealand was nonetheless a chance to get a sense of how Indian diplomats view the state of play.
At a press briefing late last week, Jaideep Mazumdar, secretary (east) at India’s Ministry of External Affairs, said the visit was “a new milestone in our bilateral relations”, with trade and commerce a common topic of discussion in the president’s New Zealand meetings.
Asked by Newsroom about the current sentiment within the Indian government regarding a trade deal with New Zealand, Mazumdar said: “I would say a free trade agreement is always a very aspirational target; and not just with New Zealand, I think for countries around the world, that is the ultimate objective to enter into a free trade agreement.”
Though an entirely reasonable assessment, the choice of “aspirational” would suggest far less urgency than on the New Zealand side when it comes to getting a deal done.
Outlining some areas for cooperation short of a full trade agreement, Mazumdar said the two countries were discussing ways to facilitate exports of fruit and vegetables; kiwifruit and apple growers may have particular interest in improved access to India, with a 2023 report from the India NZ Business Council highlighting efforts from Zespri and NZ Apples & Pears to work alongside local horticulture companies and build partnerships.
India and New Zealand also signed a new customs arrangement during Murmu’s visit, intended to tackle smuggling, allow for the exchange of ideas on customs procedures, and “help to resolve any potential issues with trade between the countries”.
Such agreements are small steps in the right direction, but a full-blown free trade agreement will require another level of commitment altogether.
The potential stumbling blocks remain predictable: for New Zealand, securing sufficient market access – for dairy in particular – and for India, winning improved visa access.
Both sets of national priorities could be tough sells to their counterparts during any negotiations.
India has long safeguarded its farmers against the perceived threat of dairy imports, walking away from the RCEP trade deal in part because of concerns about improved access for New Zealand exporters, and India’s trade agreement with Australia did not include any meaningful access for our trans-Tasman neighbour’s dairy products.
Previous governments have treated market access for dairy and other key agricultural exports as a ‘red line’ of sorts for negotiations, but there have been hints that the current Government may be willing to take a more pragmatic approach for the benefit of other sectors. The question would then be whether it could sell that pragmatism to Fonterra and other dairy producers, holding back any campaign against a trade deal that could render it politically unviable.
Making concessions on visa access for Indian citizens could be an equally fraught exercise too, given the Government’s rhetoric about the need to tighten migration settings and crack down on work visas in the face of record inward migration.
It was surely no mistake that Murmu’s schedule in Wellington included an address to the International Education Conference, where she spoke of Indian students’ “success story” in New Zealand.
“The acceptance of Indian students by New Zealand institutions not only underlines the value that Indian students place on receiving a New Zealand education, but it also demonstrates the value that Indian students are adding to New Zealand in terms of this country’s economic growth and multicultural fabric.”
But in June, BusinessDesk reported that fewer than half of student visa applications from Indian nationals had been approved in recent months – hardly a sign of a system ready to receive more applicants.
The India-Australia trade deal reserved 1000 work holiday visas a year for Indian students, and a separate migration deal improved Indian access to other visas – and again, that was without dairy access.
Of course, these obstacles could be overcome with sufficient political willpower.
But whether the coalition can muster up a shared willingness to swallow some dead rats – and do so before Luxon’s self-imposed 2026 deadline – is a rather more difficult question to answer.