The major obstacle in the stalled negotiations remains the deep conflict over dairy access. New Zealand, a global powerhouse in dairy exports, views unrestricted entry to the massive Indian consumer market as a non-negotiable cornerstone of any FTA. This is driven by its highly efficient, export-focused dairy industry, which forms the foundation of its international trade economy. New Zealand’s persistent push for market access directly clashes with India’s long-standing protectionist stance, which has kept high tariffs on dairy imports in place.

India’s reluctance to liberalize its dairy sector is rooted in deep socio-economic realities. The Indian dairy sector is one of the world’s largest, sustaining millions of small-scale farmers and landless laborers, with the majority being women and marginalized communities. These groups rely on dairy as a crucial source of daily income and nutrition, operating with a low-investment, sustainable livelihood model. Indian policymakers are acutely sensitive to the political fallout—especially following recent nationwide farmer protests—of any trade liberalization move perceived to jeopardize the stability of these rural livelihoods.

Beyond the dairy conflict, the two nations face other significant trade barriers. Sanitary and Phytosanitary (SPS) barriers continue to hinder India’s exports of agricultural products to New Zealand. Furthermore, the absence of Mutual Recognition Agreements (MRAs) complicates critical certification processes necessary for trade efficiency. Limited defense cooperation, along with existing barriers for Indian students seeking education in New Zealand, further restricts the two nations’ ability to forge a deeper, more comprehensive economic and strategic engagement.