Fraud and the risk of exploitation means New Zealand should focus on "quality not quantity" in the Indian student market, a former High Commissioner to India says.
Graeme Waters has authored the Asia New Zealand Foundation report that examines the New Zealand India relationship - including recent problems around education.
The Government has come under pressure to not punish some Indian students who face deportation because of fraudulent bank loan approval documents submitted by education agents in India.
It wants the number of international students in New Zealand to grow - the high fees they pay ultimately mean less government funding is needed.
India is a key market and since 2010, the number of Indians studying here grew from just under 12,000 to about 29,000 each year.
Study here can lead to employment and then permanent residence, with occupations currently covered including cook, chef, cafe supervisor and retail management.
Training for those occupations can be provided through lower-level courses at private training establishments, institutes and polytechnics.
"Many of the 29,000 Indian students have enrolled in just such courses in the clear expectation of being able to stay in New Zealand," Waters states in the report.
"The skill shortages are real enough, but the same provisions have created scope for unscrupulous operators to indulge in false marketing or false documentation, or to engage in exploitive practices as education providers or employers.
"Sometimes the two roles have become mixed. Bad practice on the part of a few education providers, and welfare and other issues arising from exploitive situations, could continue to attract media attention at the expense of the wider market and its opportunities."
New Zealand authorities needed to deal firmly with those who breach standards, the report argues, but longer term the "answer seems simple - quality not quantity".
"With most private training establishment and institute of technology and polytechnic students firmly focused on permanent residence, the scope for disappointment can compound.
"The growth in the number of Indian students has been impressive, but it is now in both countries' interest to focus higher up the education value chain."
Growing links but goals missed
Waters, who served as High Commissioner from 2004 to 2007 and Deputy High Commissioner to Sir Edmund Hillary in the late 1980s, noted the influence of Indian immigration on New Zealand.
Auckland's Diwali Festival of Lights is this weekend, with the Diwali Mela in Wellington next weekend, and Waters highlights Indian theatre and comedy, business groups and Indian community newspapers and radio stations.
New Zealand made India the subject of its first "NZ Inc" strategy in 2011, with the goal of shipping $2 billion of goods to India by 2015.
Instead, the value of goods exported to India annually has fallen, from $900 million five years ago to $637 million last year.
Negotiations for a free trade agreement kicked off in April 2010 and have gone through 10 rounds without a result.
Waters noted in the Asia NZ report "if divisions over trade policy qualify as a test of friendship, India and New Zealand have been well tested".
With India now the world's fastest-growing economy, New Zealand is keen to stop the testing - Prime Minister John Key in May said he pushed "pretty hard" on the deal when he met Indian President Pranab Mukherjee in Auckland.
Waters said a problem was New Zealand had very little left to concede on tariff reductions, noting an observation from India's lead trade negotiator Arvind Mehta that if India were to eliminate tariffs on agricultural items its politicians would ask, "where is the gift in return?".
India - "the centre of a bustling universe" - could also prefer to concentrate on the Regional Comprehensive Economic Partnership (RCEP) trade negotiations, involving 16 countries including New Zealand.
Waters suggests India could be keen to progress at FTA nonetheless to avoid missing out as other countries link up, and the probability that New Zealand companies including in dairy would invest in the Indian sector after an agreement was reached.
"For both sides, the real driver can be value added. Indian policy-makers know that at least 200 million people currently on farms will need to seek employment elsewhere. One of the sources of employment could logically be in food processing and manufacturing.
"The vulnerability of rural workers can make the granting of market access...a difficult sell...but improved welfare will depend not on continued subsistence production but on greater opportunities in agri-business and more sophisticated handling, storage, processing and manufacturing.
"New Zealand's track record elsewhere suggests that it could be a valuable player for India too."