ANALYSIS FTA with New Zealand offers India a $2-billion chance to replace Chinese imports

India and New Zealand announced the conclusion of trade negotiations on December 22.

India could capture close to $2 billion of New Zealand’s imports from China in the medium to long term once tariff-free access kicks in under the trade deal between New Delhi and Wellington.

The estimate reflects sectors where India can realistically compete with China in New Zealand.

It assumes that Indian exports can roughly replace 30–35 percent of Wellington’s imports from the China in categories such as machinery and electrical equipment, apparel, vehicles, plastics, and iron and steel, where it has competitive pricing, production scale and high global shipments.

In 2024, New Zealand imported more than $5.5 billion worth of machinery, electrical equipment, apparel, vehicles, plastics, and iron and steel from China, so capturing roughly 30–35 percent of these imports would translate to a $2-billion opportunity for India.

On December 22, India and New Zealand concluded talks for a free-trade agreement (FTA), under which Wellington will grant zero-duty access to 100 percent of Indian exports. New Delhi has offered to cover 70.03 percent of tariff lines, representing 95 percent of New Zealand’s imports.

New Delhi has excluded nearly 30 percent of tariff lines, while 30 percent of the covered tariffs will be eliminated immediately (EIF), with the remainder phased out over time.

Most Indian exports enjoy Most-Favoured Nation (MFN) duties from New Zealand in the range of 0–5 percent, while a few products face tariffs of up to 10 percent.

New Zealand’s merchandise imports from China stood at $10.19 billion in 2024, while Indian exports to the Pacific nation were valued at $617.34 million.

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The biggest opportunity perhaps lies in electrical and electronic equipment as well as machinery, including nuclear reactors and boilers.  New Zealand imported about $2.03 billion worth of electrical machinery from China in 2024 and around $1.6 billion in machinery and related products.

Indian shipments in these categories remain relatively small, at $58 million for machinery and related products and just $14.9 million for electrical and electronic equipment in 2024, highlighting the gap that could be narrowed once concessions kick in.

Iron and steel articles also represent a potential sector for Indian exporters. In 2024, New Zealand imported around $372 million in this category from China, while India’s exports were relatively small at less than $15 million.

To be sure, while India is a significant global exporter of iron and steel articles, shipping  close to $10 billion last year, the potential to replace New Zealand’s imports from China is moderate given factors such as established supply chains, existing contracts with Chinese suppliers, and quality requirements.

The labour-intensive textile and apparel sector could also become a key beneficiary of the FTA.

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India ranks as the third-largest exporter of these products to New Zealand after China and Bangladesh. Textile and apparel exports stood at $138.65 million in 2024.

On the other hand, New Zealand’s imports from China in some of these categories such as knitted apparels crossed $850 million in 2024.

The vehicle segment, too, is a lucrative avenue.

In 2024, New Zealand imported about $490 million of vehicles from China, while India’s shipments to New Zealand were relatively lower at around $23.7 million. While immediate substitution in this category could be challenging, tariff-free access under the trade deal could help India gradually expand its presence.

Plastics and leather products represent additional areas where India could expand its presence in New Zealand.

New Zealand imported around $518.6 million of plastics from China, while India’s exports were only $12 million.

Leather and related products, though smaller in volume, also have potential, with New Zealand importing significant amounts from China and India’s current shipments remaining minimal.

There is limited scope for Indian exports to replace Chinese goods in categories such as toys even with tariff-free access, given long-term contracts with existing suppliers and product-specific quality standards.

New Zealand’s toy imports from China were significant at almost $333 million, while India’s were less than $5 million in 2024.

The trade deal between India and New Zealand is expected to be operational within six to seven months after all required approvals and processes are completed.

Gains from tariff concessions are likely to be gradual, as exporters will need time to adjust to supply chains, secure buyers, and expand their presence in New Zealand.