Prime Minister Christopher Luxon is sticking by his commitment to secure a free trade deal with India.
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Opinion by Scott St John
Scott St John is the cChair of ANZ Bank New Zealand and is a director of ANZ Group and will join the Prime Minister’s trade mission to India.
KEY FACTS:
Prime Minister Christopher Luxon is heading to India, taking along one of the largest delegations a New Zealand PM has ever travelled with.
New Zealand and India entered into free trade negotiations in 2010 but the last round of negotiations happened in Delhi in 2015.
Ministers Todd McClay (trade), Louise Upston (tourism) and Mark Mitchell (ethnic communities) will join Luxon, as will business and community figures.
OPINION
First-time visitors describe how all your senses are assaulted when you arrive in India.
I’ve been lucky to visit India a couple of times, and the country’s energy, colour and optimism are what I remember. There is a collective sense of self-belief.
When India overtook China tobecome the world’s most populous country in 2023, it represented something far more significant than an historic demographic milestone.
Just as China took advantage of its immensity to become a global economic superpower within a generation, India is now poised to unleash its vast potential.
This is a country with a young, highly educated and expanding workforce, transformative digital initiatives, ambitious renewable energy plans, and sophisticated technology as evidenced by their successful lunar landing mission.
There’s a great ambition in the nation as they strive for the best for themselves and the next generation.
It’s no wonder so many Western countries are beating a path to India’s door.
In global trade, experience shows early mover advantage brings significant benefits. Being the first Western country to sign a Free Trade Agreement (FTA) with China has proved enormously valuable for New Zealand, with two-way trade now about $40 billion a year.
New Zealand needs to move quickly on a trade agreement with India if we want to be part of its success story. But how do we achieve this?
We know the economic opportunity for New Zealand in India will be very different from the one found in China.
We may not be able to negotiate a “free” trade agreement but will likely have to settle for one that starts us on a long pathway to one. That’s because we know that dairy, our largest export earner, is highly protected in India and is unlikely to be part of their thinking.
As we regularly see with protests in the capitals of Europe, agriculture remains sensitive globally with many politicians afraid of the impact of opening this sector on local farmers and provincial communities. India is no different.
That shouldn’t stop us talking about dairy, though.
India’s domestic consumption is huge and even if we could export all of New Zealand’s annual milk production, it would only make up about 10% of their needs.
In 2024, New Zealand exported about $60 million of dairy to India. These exports faced tariffs – or local taxes – of between 30% and 60% which make our products more expensive in the eyes of some consumers.
Nevertheless, India has a large, growing and increasingly sophisticated dairy-consuming population.
Demand for dairy products is growing at a faster rate than domestic supply and India is forecast to have the second largest “dairy deficit” market after China by 2050.
New Zealand is perfectly placed to complement their domestic dairy production. We already supply specialist advanced proteins not produced in India for sports nutrition, and medical and paediatric manufacturers.
The politics of dairy makes an immediate China-style comprehensive FTA with India unlikely, but that is far from the only option and no reason not to be ambitious.
A so-called “early harvest” framework with India would allow us to identify the low-hanging fruit now and lay the groundwork to ease the way for more exporters later.
Christopher Luxon, with India's PM Narendra Modi at October's East Asia Summit. Photo / Supplied
Australia has been an early mover in this space, concluding a Comprehensive Economic Cooperation Agreement in 2022 which has removed tariffs on 90% of Australian goods exported to India. It’s already delivering for both countries.
We might not have a mining sector like Australia, but New Zealand does have other natural advantages when it comes to international trade.
India has a growing middle class, about a third of its 1.4 billion population, with developing tastes for imported high value-added food, healthcare products, a desire to travel and a culture that values qualifications from overseas universities.
Our world-leading agritech and dairy technology could make a huge difference to India’s agricultural productivity and dairy production efficiency.
Relationships, of course, should be two-way.
India has world-class hardware and software sectors that can offer complementary skills to help our domestic companies. Partnering with these Indian companies could accelerate the growth and productivity gains many New Zealand companies are struggling to get.
At ANZ, our Bengaluru Global Capability Centre’s (GCC) 8000-strong team showcases the power of technology collaboration, accounting for 20% of our global workforce. This is not simply offshoring low value tasks.
We’ve used the GCC’s dedicated New Zealand teams for 35 years, leveraging the country’s expertise in automation, AI, and machine learning to use innovations developed in India to enhance our operations at home.
An initial trade agreement with India won’t grant market access for every one of our exporters, but it will pave the way for us to do business more seamlessly.
And it will make partnerships more straightforward, and create trade and investment opportunities - in both countries.
