A tentative trade tango: Why Luxon’s Delhi visit is important for India and New Zealand

New Zealand Prime Minister Christopher Luxon’s visit to India has injected fresh momentum into a bilateral relationship long overshadowed by its unrealised potential. Landing in New Delhi with one of the largest delegations ever to accompany a Kiwi premier, Luxon met his Indian counterpart, Narendra Modi, to reboot free trade agreement (FTA) talks, dormant since 2015. The stakes are high: Luxon has invested significant political capital for this trip, eyeing India’s burgeoning market, while Modi seeks to diversify India’s economic partnerships amid global tariff wars.

Yet, beneath the warm handshakes and joint statements lies a familiar impasse—agriculture and dairy—where the two nations’ positions remain stubbornly apart. For this partnership to transcend photo ops, both leaders must address the issue.

On the FTA, New Zealand pushes for liberalised access to India’s 1.4 billion consumers, particularly for its dairy, horticulture, and forestry exports. Luxon’s coalition sees this as a lifeline to double New Zealand’s export value within a decade, with India—a soon-to-be third-largest economy—offering a tantalising prize. India, however, approaches with caution, insisting that agriculture and dairy be excluded or heavily protected. This stance reflects a hard reality: India’s dairy sector is dominated by millions of small-scale farmers. New Zealand’s industrialised producers, exemplified by Fonterra’s milk powder juggernaut, threaten to upend this delicate ecosystem. With rural livelihoods and food security at stake, New Delhi demands safeguards, wary of repeating the stalled 2015 talks where dairy proved to be a deal-breaker.

Trade figures underscore the modest foundation both seek to build upon. In 2023-24, bilateral trade reached $1.75 billion—New Zealand exported $0.84 billion to India, including wool, iron, steel, fruit, nuts, and aluminium, while importing $0.91 billion, chiefly pharmaceuticals, machinery, textiles, and precious stones. Though respectable, this pales beside New Zealand’s $40 billion trade with China, despite comparable population sizes. India ranks just 15th among New Zealand’s partners, a stark reminder of untapped potential. For India, New Zealand’s offerings complement its industrial needs, but the asymmetry in scale—India’s vast market versus New Zealand’s niche exports—fuels Delhi’s reluctance to open sensitive sectors.

Defence cooperation offers a less contentious pillar. Luxon and Modi inked a memorandum to institutionalise ties, eyeing joint military exercises, training, and defence industry collaboration. As maritime nations bookending the Indo-Pacific, both share an interest in countering China’s assertiveness. New Zealand, a Five Eyes member, however, brooks suspicion. India’s naval presence bolsters regional stability. Joint exercises could evolve into a regular feature, enhancing interoperability and trust. Yet, this remains a sideshow to the economic main event—strategic alignment alone won’t unlock the relationship’s full promise without trade breakthroughs.

The Indian diaspora in New Zealand—292,000 strong, the third-largest ethnic group—anchors people-to-people ties. Contributing a staggering $10 billion annually to the Kiwi economy, Indian-Kiwis dominate skilled migration and international student enrolments. Luxon, joined by cricket stars Ross Taylor and Ajaz Patel, hailed their role as a bridge. For Modi, this diaspora is a soft-power asset, amplifying India’s cultural footprint. Yet, their influence cuts both ways: demands for easier mobility clash with New Zealand’s tight immigration controls, a tension Modi flagged by calling for a pact to ease skilled worker flows while curbing illegal migration.

If New Zealand craves a strategic partnership, it must reckon with its heft as a richer nation. With a GDP per capita dwarfing India’s, it holds leverage to be magnanimous—offering generous trade terms and freer movement of people. India’s rigid negotiating style, honed against bigger players like the EU, won’t bend easily without concessions. New Zealand could take a leaf from Australia’s playbook, sidelining dairy in its trade pact with India.

A “good” deal, as Luxon puts it, beats a perfect one delayed indefinitely. India, in turn, must see beyond protectionism to harness New Zealand’s niche strengths.

Both leaders must be bold: Luxon by tempering dairy ambitions, Modi by embracing managed liberalisation. Without such audacity, this partnership will remain a polite footnote in an Indo-Pacific century.

The writer is a senior journalist with expertise in defence. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.