Free trade support from Indian PM

India's Prime Minister has given a strong statement of support for a free trade deal with New Zealand, including a nod for it to include dairy and agriculture - one of the most critical aspects for New Zealand.

Dr Manmohan Singh and Prime Minister John Key met for their formal bilateral meeting in New Delhi last night as part of Mr Key's state visit at the invitation of Dr Singh.

After the meeting, Dr Singh said he would like to expand trade between the two countries "significantly beyond current levels." He said the negotiations currently underway were proceeding well "and in the right direction."

He also indicated high level support for including dairy and agriculture in the deal - one of the critical issues for New Zealand.

"New Zealand has proven strengths in the dairy, agriculture, food processing and renewable energy sectors. These are areas of great relevance to our development priorities."

In return, he believed India's services sector would contribute to New Zealand's economic competitiveness.

Dr Singh's support will have heartened Prime Minister John Key who has spent much of the week emphasising the need for any trade agreement to be 'quality' and include agriculture. About 60 per cent of India employment is in agriculture, but it is largely smallholdings and India faces food security issues.

Currently tariffs of about 50 per cent apply for imports of dairy goods, unless India has a shortage. Critical to the success of an FTA from New Zealand's point of view will be how far and how fast India will agree to reduce or phase those tariffs out.

Mr Key said the two had very positive discussions on a wide range of issues.

"We both acknowledge that while our current relationship has a great foundation, we should not be complacent. We want to grow our partnership."

He said he attached a high priority to the conclusion of the free trade agreement.

"I strongly believe a high quality, comprehensive FTA will be to the mutual benefit of both of our economies."

Two-way trade between the two countries is currently at $1.3 billion annually. It is hoped to increase that to $3 billion by 2015.

The leaders also agreed to cooperate more on security and defence issues, including regional issues such as piracy and the security of shipping lanes. Mr Key also formally gave New Zealand's support to India for reforms of the United Nations' Security Council, including expanding the permanent membership to include India.

Mr Key announced New Zealand would appoint a new defence advisor to India to work on strengthening the relationships in defence - one area that has been slowly building.

Although India has faced some criticism for refusing to sign up to international nuclear disarmament treaties, in the joint statement issued after the meeting both Prime Ministers said they 'shared the vision of a nuclear weapon free world' and New Zealand welcomed India's increased engagement with control regimes.

Both leaders reinforced the close and long standing links between the two countries, and further cemented them further with a film cooperation agreement, which Mr Key is hoping will give further incentive to Bollywood producers to film in New Zealand with spin offs for tourism.

They also signed a joint Prime Ministers' Education agreement for scholarships in business and sport, and agreed to build on existing sporting links, especially in cricket and hockey.

Mr Key will travel to Mumbai today where he will visit a Bollywood studio before going to see one of the Indian Navy boats which uses a New Zealand made Hamilton Jets propulsion engine.

He will return to New Zealand on Friday.