Indian FTA is being welcomed across much of New Zealand’s rural economy as a rare piece of good news for exporters heading into 2026, even as political divisions threaten to overshadow what many in the sector see as a long-overdue breakthrough.
Trade and Agriculture Minister Todd McClay, Prime Minister Christopher Luxon and the negotiating team led by MFAT’s Vangelis Vitalis are being credited with delivering a deal that cuts tariffs on meat, wool, horticulture and forestry products. For sheep farmers in particular, the agreement promises a chance to claw back market share for lamb that was lost when Australia secured its own free trade agreement with India two years ago.
Supporters argue that the benefits go well beyond commodity tariffs. The Indian FTA also establishes a closer political and economic partnership with New Delhi, placing India alongside China, the United Kingdom, the European Union and the Gulf States as a priority trade relationship for New Zealand.
Industry leaders have described the agreement as one of the most significant trade wins in years, noting the difficulty of negotiating with a market as complex and politically sensitive as India. Several commentators have gone as far as calling Vitalis one of the country’s most effective trade negotiators, citing his ability to unlock doors that had been closed to successive governments.
Yet, as with all trade agreements, the Indian FTA is not without its critics. The dairy sector, which has long eyed India as a major growth opportunity, has emerged with minimal immediate gains. That outcome has disappointed exporters but not surprised seasoned observers.
India’s dairy industry is vast, fragmented and politically powerful. With an estimated 80 million dairy farmers, most operating on very small holdings, the sector wields enormous influence. The country is also home to roughly 300 million cows and buffaloes and accounts for about a quarter of global milk production. Any proposal that threatens this domestic base is almost guaranteed to meet resistance, regardless of how much pressure foreign negotiators apply.
This reality has shaped the political debate in Wellington. New Zealand First leader Winston Peters has indicated he will oppose ratification of the Indian FTA when the enabling legislation comes before Parliament later this year. His stance has prompted questions across the farming community about what more could realistically have been achieved, particularly for dairy.
Some have suggested Peters believes a better deal for dairy was within reach, while others speculate that immigration-related clauses may be driving his opposition. Trade analysts, however, have largely dismissed the notion that extra time at the negotiating table would have delivered substantially greater dairy access, arguing that India’s red lines in this area are immovable in the short term.
In contrast, the main opposition party, Labour, has hinted it may support the Indian FTA, a move that would be crucial if the government is to secure enough votes for ratification. Labour figures have described the deal as a positive step, even while reserving the right to scrutinize its social and environmental safeguards.
The unusual alignment — with Labour leaning toward support and New Zealand First signaling resistance — has added an unexpected layer of drama to what is normally a bipartisan policy area.
Even within the dairy industry, the tone has been measured rather than hostile. The Dairy Companies Association of New Zealand, which represents dairy exporters, has acknowledged its disappointment at the limited market access secured but has publicly praised the government’s negotiating team. The group has also urged ministers to continue working on the structural challenges facing dairy trade with India, suggesting that progress may yet come through follow-up discussions and sector-specific initiatives.
For the wider rural economy, however, the Indian FTA is already being framed as a win. Lower tariffs on lamb, beef, wool, kiwifruit and forestry products are expected to open new commercial pathways and restore competitiveness in a market that is only growing in importance.
As the political debate unfolds, farmers and exporters are watching closely. They see the agreement not as a perfect outcome, but as a foundation — a first real step into a market that has long been more promise than reality.
Whether Parliament ultimately ratifies the Indian FTA may depend less on its technical merits than on political positioning. But for many in the countryside, the verdict is already in: this is a deal worth having.
