Compounding Gains: On the India-New Zealand Free Trade Agreement

📌 Summary:

• India-New Zealand FTA signed recently; NZ economy is 1/16th of India's and represents less than 1% of India's total trade — seemingly underwhelming in isolation
• But significant as the 8th trade agreement India has signed/concluded negotiations on in the past 3.5 years
• Strategic rationale: (a) Diversify supply chains post-COVID-19 and amid US tariff frictions; (b) Reduce China dependence (16% of India's imports); (c) Diversify export destinations especially as US tariffs hit Indian exports
• COVID-19 pandemic and US tariff frictions showed India the need for supply chain diversification on both import and export sides
• India-EFTA precedent: $100 billion investment commitment to facilitate (not guarantee) investment — significant precedent for including investment commitments in FTA text
• India-NZ FTA: includes dedicated investor desk for NZ investors facing issues in India — targeted approach to FDI
• Multiple goals of India's FTA strategy: reduce China dependence, increase/diversify exports, create jobs, bolster capital account, raise incomes
• Remaining challenge: helping domestic manufacturers scale up remains a sticky, unresolved problem

📌 Prelims Facts:

• India-EFTA TEPA (2024): EFTA = European Free Trade Association (Switzerland, Norway, Iceland, Liechtenstein); USD 100 billion investment facilitation commitment
• India has signed FTAs with UAE (2022), Australia (2022), EFTA (2024), New Zealand (2026)
• WTO provisions govern FTA rules; India must comply with MFN and other GATT principles