India-New Zealand FTA: First Duty Cuts Notified, Dairy Kept Out
India's Finance Ministry has notified the first set of lower customs duties (import taxes) on goods coming from New Zealand under the India-New Zealand Free Trade Agreement (FTA). The new rates apply from 20 October 2026, the day the agreement comes into force.
Sheep meat gets zero duty from day one. Kiwi fruit gets a reduced rate of 15%. Wine and manuka honey (a costly honey made by bees from the flowers of the manuka bush in New Zealand) also get lower duties.
Some products, such as kiwi fruit and apples, get the low rate only for a fixed quantity each year. This system is called a tariff-rate quota (TRQ). Imports above that quantity pay a higher duty.
Dairy (milk, cream, whey, yoghurt, cheese) and some other sensitive farm products are kept fully out of the duty cuts, to protect Indian farmers.
A separate customs notification, issued on 12 October 2026, sets the rules of origin: the tests a product must pass to count as "made in New Zealand" and get the lower duty.
The FTA was signed on 27 April 2026 in New Delhi. New Zealand removes duties on all Indian goods from day one, and has committed to help bring about US$20 billion of investment into India over 15 years.
Free Trade Agreements: Concept and WTO Framework
A Free Trade Agreement (FTA) is a deal between two or more countries to remove or sharply cut import taxes (tariffs) on most of the goods they trade with each other. Each country still keeps its own tariffs for countries outside the deal. Modern FTAs also cover services, investment, rules of origin and the movement of skilled workers. World Trade Organization (WTO) rules normally say a country must treat all members equally, but Article XXIV of the GATT (General Agreement on Tariffs and Trade) allows FTAs as an exception, as long as they cover "substantially all the trade" between the partners.
The customs notification is the step that actually turns the signed FTA into lower taxes at the border. From 20 October, an importer bringing in New Zealand goods can claim the lower FTA rate, but only if the goods meet the rules of origin.
Tariff-Rate Quota (TRQ) Mechanism
A tariff-rate quota, or TRQ, is a two-level import tax. A country lets a fixed quantity of a product come in at a low tax (the in-quota rate). Anything above that quantity pays a much higher tax (the out-of-quota rate). It is like a shop that sells the first 100 tickets at a discount and the rest at full price. Countries use TRQs to open their market a little without exposing their own farmers to a flood of cheap imports.
The new notification gives some New Zealand products, such as kiwi fruit, a lower rate only for limited quantities. This is the TRQ method: New Zealand gets real access to the Indian market, and Indian fruit growers stay protected because the quantity is capped.
Sensitive Sector Protection in Trade Agreements
When two countries sign a trade deal, they do not cut taxes on every product. Each country keeps a short list of products where it does not cut import taxes at all, or cuts them only a little. These are called sensitive sectors. Usually they are products where millions of small producers would be hurt if cheap foreign goods came in. For India, the most important sensitive sector is dairy, followed by farm items like rice, wheat and sugar.
The new customs notification gives lower duties on sheep meat, wine, honey and fruit from New Zealand, but leaves dairy completely out. This is a direct example of sensitive sector protection. Even with one of the world's largest dairy exporters, India used the exclusion list for milk products and TRQs for fruit, while still opening most of its tariff lines.
- India-New Zealand FTA signed: 27 April 2026, New Delhi; in force from 20 October 2026
- Rules of origin notified: 12 October 2026, effective 20 October 2026
- Sheep meat: zero duty from day one; kiwi fruit: reduced to 15%
- Kiwi fruit duty-free quota: 6,250 tonnes (year 1) rising to 15,000 tonnes (year 6)
- Apple quota: 32,500 tonnes rising to 45,000 tonnes; in-quota duty 25% (half of 50%)
- Manuka honey: tariff cut by 75% over five years (from 66%)
- Wine: tariffs cut by 66 to 83% over ten years
- India gives concessions on about 70% of tariff lines; 29.97% excluded (dairy, sugar and others)
- New Zealand: duty-free access for all Indian goods from day one
- Investment commitment: US$20 billion over 15 years
- Visas: up to 5,000 Indian skilled workers at a time; 1,000 working holiday places a year