India–New Zealand FTA to create jobs, lift incomes as doors open to 1.4 billion Indian consumers: Christopher Luxon

The finalization of a Free Trade Agreement (FTA) between India and New Zealand marks a significant milestone in their bilateral relations, promising to usher in a new era of economic cooperation. This development is particularly noteworthy given India's strategic pivot towards bilateral trade agreements after its withdrawal from the Regional Comprehensive Economic Partnership (RCEP) in 2019.

**Background Context and What Happened:**

India, with its rapidly growing economy and a consumer base of 1.4 billion, has become an attractive destination for global businesses. New Zealand, a developed, export-oriented economy, has long sought to diversify its trade partners beyond its traditional markets. While discussions for an FTA between India and New Zealand have been ongoing for over a decade, with initial negotiations stalling around 2007-2010 due to differences over market access for dairy products and services, the recent announcement by New Zealand Prime Minister Christopher Luxon signifies a renewed impetus and a swift conclusion to these negotiations. The agreement aims to liberalize trade in goods and services, reduce tariffs, and eliminate non-tariff barriers, thereby facilitating smoother trade flows. The stated goals include job creation, income growth, and a substantial boost in exports for both nations, with New Zealand businesses gaining significant access to the vast Indian market.

**Key Stakeholders Involved:**

Several key stakeholders are central to this FTA. On the Indian side, the **Government of India**, particularly the Ministry of Commerce and Industry, has been the primary negotiator, aiming to secure favorable terms for Indian exporters and consumers. Indian businesses, especially those in sectors like IT, pharmaceuticals, textiles, and engineering goods, stand to benefit from increased market access in New Zealand. Conversely, sectors like dairy and agriculture might face increased competition. **Indian consumers** could benefit from a wider range of high-quality New Zealand products at potentially lower prices. On the New Zealand side, the **Government of New Zealand**, led by Prime Minister Christopher Luxon, has championed this agreement, seeing it as a crucial step for economic growth. New Zealand's powerful **dairy, agriculture, forestry, and tourism sectors** are major beneficiaries, looking to tap into India's burgeoning middle class. **New Zealand businesses** across various sectors anticipate enhanced export opportunities and investment flows. Globally, organizations like the **World Trade Organization (WTO)** provide the overarching framework within which such bilateral FTAs are negotiated and implemented, ensuring they adhere to principles of non-discrimination and transparency (as per GATT Article XXIV).

**Significance for India:**

This FTA holds immense significance for India. Economically, it provides India access to New Zealand's advanced agricultural technology, high-quality dairy products, and specialized services. For Indian exports, it opens a developed market for its IT services, pharmaceuticals, textiles, and engineering goods, supporting the 'Make in India' initiative by providing a global platform. Strategically, strengthening economic ties with New Zealand, a key player in the Indo-Pacific region, aligns with India's broader 'Act East' policy and its efforts to diversify its trade partnerships beyond traditional blocs. This move also reinforces India's commitment to multilateralism and its role as a responsible global trading power. Socially, the agreement is projected to create jobs in sectors that experience increased demand due to expanded trade, contributing to higher incomes and improved living standards.

**Historical Context and Broader Themes:**

India's trade policy has evolved significantly. Historically, India pursued a more protectionist approach. However, post-liberalization in 1991, there has been a gradual shift towards greater integration with the global economy. The current government's 'Atmanirbhar Bharat' (Self-Reliant India) vision, while emphasizing domestic manufacturing, also recognizes the importance of global trade and strategic FTAs. India's decision to withdraw from RCEP highlighted its concerns about market access for its goods and the potential impact on domestic industries, particularly agriculture and dairy, from countries like China and Australia. This withdrawal spurred India to focus on bilateral FTAs, leading to successful pacts like the India-UAE Comprehensive Economic Partnership Agreement (CEPA) and the India-Australia Economic Cooperation and Trade Agreement (ECTA), and ongoing negotiations with the UK and EU. The New Zealand FTA fits perfectly into this renewed bilateral strategy, demonstrating India's pragmatic approach to international trade.

**Future Implications:**

The India-New Zealand FTA is expected to significantly boost bilateral trade volume, which stood at a modest USD 2.39 billion in 2022-23. Beyond trade, it could foster greater investment flows, technology transfer, and collaboration in areas like education, tourism, and innovation. For India, this agreement could serve as a template for future FTAs with other developed economies, bolstering its position as a global manufacturing and service hub. However, it also presents challenges, particularly for certain domestic sectors that may face increased competition. The government will need to implement robust support mechanisms for these sectors to enable them to adapt and become more competitive. Furthermore, the success of this FTA will depend on effective implementation, continuous dialogue, and addressing any emerging trade disputes promptly. This agreement solidifies India's economic diplomacy and its commitment to building a network of strategic partnerships across the globe.

**Related Constitutional Articles, Acts, or Policies:**

1. **Article 253 of the Indian Constitution**: This article grants Parliament the power to make any law for implementing any treaty, agreement, or convention with any other country or any decision made at any international conference, association, or other body. This provides the constitutional backing for ratifying and implementing international trade agreements like FTAs.

2. **Article 246 read with Schedule VII (Union List, Entry 14)**: Foreign affairs, including entering into treaties and agreements with foreign countries and implementing treaties, agreements, and conventions with foreign countries, are subjects under the exclusive legislative competence of the Union Parliament.

3. **Foreign Trade (Development and Regulation) Act, 1992**: This Act provides the legal framework for the development and regulation of foreign trade in India, granting the Central Government powers to formulate and implement foreign trade policy.

4. **India's Foreign Trade Policy (FTP)**: The current FTP 2023 aims to make India a global trading hub and is designed to boost exports and facilitate trade through various measures, aligning with the objectives of FTAs.

5. **Make in India & Atmanirbhar Bharat Policies**: While promoting domestic manufacturing, these policies also recognize the role of strategic global partnerships and FTAs in accessing new markets and integrating into global value chains.