An existing history of collaboration between New Zealand and Indian dairy industries is something Fonterra must look to expand on.
India may provide a long-term answer to New Zealand's growing over-reliance on trading with China when it comes to agricultural exports -- particularly dairy.
The prospects for a free trade agreement (FTA) with India were canvassed at "Summit 2014: Business beyond Barriers" in Auckland this week to celebrate the 25th anniversary of the India New Zealand Business Council.
It is clear the rise of Indian Prime Minister Narendra Modi's Bharatiya Janata Party has reignited prospects of increased economic openness and with it NZ's hopes for finally securing the long sought FTA. Modi has a clear mandate for change -- how radically that translates into a shift away from an isolationist economic mindset when it comes to dairy remains to be seen. But we'll report back after NZ lead FTA negotiator Rupert Holborow visits New Delhi later this month.
Trade Minister Tim Groser does not expect the FTA to be plain sailing: "If we receive the green light from New Delhi, we will come hard up again on the central problem NZ has not only with India but with every country we negotiate with: agriculture liberalisation, without which New Zealand cannot enter into any FTA.
"Somehow, we have yet to convince some of our negotiating partners that there are not secret convoys of NZ milk tankers, hidden behind the Bombay Hills ... just waiting to flood their country with milk, given half a chance through trade liberalisation."
Where Groser believes NZ companies will add value to India is by playing a role in the modernisation of Indian agriculture in areas where NZ is "absolutely cutting edge".
The Trade Minister is right on the button when he says NZ's agriculture technology and longer-term NZ investment can be part of India's agriculture answer and not part of the problem.
Difficulty is that all the signs -- so far -- is that India indeed wants NZ technologies to help its economic development (not just agriculture but across the board) but is finding it difficult to swallow the tariff cuts and greater access to the Indian market that NZ wants as the usual FTA quid pro quo.
The metrics for an Indian FTA are compelling.
India is New Zealand's 15th-largest bilateral trading partner, with overall goods trade exceeding $1.1 billion in 2013; $725 million was New Zealand exports (an almost doubling in five years).
But it doesn't speak to the opportunity which India represents for New Zealand. India is expected to become the world's third largest economy by 2025 (it's currently in 10th spot). With the world's second largest population -- 1.2 billion people, half of whom are under 25 -- the next two decades represent an economic paradigm shift for India and with it a major rise in Indian middle-class consumers.
Navigating a way through dairy tariffs which stand at between 20 to 60 per cent, is an obvious precursor to finding sustained success in India.
From Fonterra's side, getting the value proposition right is a huge part of the equation. Fonterra director John Monaghan said the dairy giant had been a long-term supporter of an FTA with India as it would benefit the dairy industries in both countries. Monaghan used metrics to illustrate why NZ was not a threat to India's dairy industry. India was the world's largest milk producer, accounting for 17 per cent of world production; New Zealand produced less than 3 per cent.
Unlike in China, where stimulating demand for dairy was akey part of Fonterra's strategy, dairy is a traditional part of the Indian diet. More than 17 per cent of the world's milk production is produced in India, the vast majority of which is consumed locally.
But Indian demand for dairy will grow more every 10 months than New Zealand demand was projected to grow in the next decade.
Monaghan uses the company's experiences in Sri Lanka as an example of what New Zealand can bring to the Indian table.
When Fonterra collaborated with dairy farms in Sri Lanka, production had increased by 42 per cent and average incomes rose by 50 per cent in the first year.
"We would envisage a similar approach in India."
There's an existing history of collaboration between the New Zealand and Indian dairy industries, something which Fonterra must look to expand on.
They've done it before and have success with reciprocal market access. In China, Fonterra played a role in the consolidation of a highly fragmented sector, offering expertise to improve productivity and
And although Fonterra have no direct investment plans at this stage, you can bet they'll be keeping a close eye on developments and throwing their full weight behind any FTA negotiations.