New Zealand's Trade Horizon in Modi 3.0 and Vision 2047

The incumbent Bhartiya Janata Party (BJP) has now formed a coalition government under the National Democratic Alliance (NDA) but remains the largest partner.

While India settles into the new power dynamics of its domestic politics, at the outset, there seems to be no major change, as key members of the previous cabinet, including interior, finance, defence, and foreign ministries, are retained. Minister S. Jaishankar has once again been sworn in as India’s Minister for External Affairs (MEA), indicating a policy of continuity in its international relations. The busy calendar of the MEA and Modi's flurry of international visits within a month of taking office is a signal to the world that it’s “continuity with speed” for Modi 3.0.

Prime Minister Christopher Luxon was quick to congratulate Modi over a phone call where Modi and Luxon also agreed to advance cooperation in trade, animal husbandry, pharmaceuticals, education, space, and other areas. Luxon has always maintained close ties with the Indian diaspora, and expressed hopes of securing a trade deal with India within his current term. With Modi now back in office post India’s general elections, the stage is set for New Zealand’s highest leadership to deliver on its promise.

Its therefore no surprise that recent momentum in bilateral visits has picked up. The President of India Her Excellency Droupadi Murmu will pay an official visit to New Zealand this month. New Zealand trade minister Todd Mc Clay, who met his India counterpart Piyush Goyal in Italy this July on the sidelines of G-7 meet, is also planning to re-visit New Delhi after this. This is expected to be followed up by PM Luxon’s visit to India in the third quarter of this year in which a big trade delegation is expected to accompany him.

The Big Question: A Plan for deeper New Zealand-India Trade ties?
For any such plan to come to fruition, it is crucial to understand India's needs. The scope for a sustainable Comprehensive Economic Partnership (CEP) agreement always exists within the dynamics of reciprocity. While India has been known for being inward-looking and creating barriers for trade deals and market access to international players, there has been a significant shift over the past decade under Prime Minister Modi, especially post-COVID, with countries looking to diversify their trade away from China. We have seen India closing first rounds of a CEP with Australia and the UAE and entering negotiations to close trade deals with the EU, UK, and Canada. This signals to the world that India is carefully but surely opening its shores to international trade. Where does New Zealand’s economic relations with India stand in comparison with these developments?

Current Figures and Developments
Based on Statistics New Zealand data, in the year ended March 2024, New Zealand exported $1.35 billion of total goods and services to India and imported $1.48 billion, representing a trade balance of $-126.03 million and a total trade value of $2.83 billion, constituting 1.4% of New Zealand’s total exports and imports of total goods and services. India ranks as the 13th largest trading partner for New Zealand, despite being the fastest growing economy in the world and poised to become the third largest economy globally within the next three years. 62% of New Zealand’s bilateral exports to India constitute services trade, of which 88% is constituted by Travel services. 75% of its bilateral imports from India, however, consists of goods trade. Clearly, there’s a huge untapped potential for expansion and diversification of bilateral trade between the two countries. A glaring omission in this context is the lack of direct air connectivity between the two countries, despite India being already connected with three cities in Australia through direct flights.

While other developed countries have been heavily investing in India through inward Foreign Direct Investment (FDI) route, New Zealand’s cumulative FDI equity flow into India has been barely 0.01% of its total, worth US $ 82.5 million, ranking 57th, just above West Indies and Samoa.

The above figures notwithstanding, New Zealand has been taking the right steps in its engagement with India, working collaboratively in sectors where India can benefit from its technological know- how. For instance, New Zealand’s G2G, a public sector company, signed an MOU with the Jammu and Kashmir administration to transform the sheep farming sector with the objective of improving farmers' remunerations, transferring technology, and marketing & adding value to sheep products in the state. Another example is New Zealand’s kiwifruit giant, Zespri, which is exploring a proposal to assist the local Indian kiwifruit industry in Northeastern India to improve orchard and supply chain performance, strengthen returns, and support their communities. Similar initiatives are seen in the meat sector, where Quality NZ Group, in collaboration with a local partner, has set up a food processing unit in India, committing to the ‘Make in India for the world’ campaign.

Besides agritech partnerships, New Zealand companies have also contributed to India’s rising aspirations in the high-tech sectors. As an example, Rakon Technologies, a New Zealand-based company, has played a significant role in partnering with India’s premier Space Research Organization (ISRO) in its space missions and satellite projects, fostering R&D partnership opportunities and knowledge sharing. In a similar vein, Valocity, a New Zealand-based property valuation business has contributed to modernising property valuation, in the real estate and financial markets in India.

India has the infrastructure, skills, and labour force to enable this new investment. All of these are steps in the right direction, without a formal economic cooperation agreement in place. However, how do they align with India’s needs and growth plans for a win-win partnership?

India’s Vision @ 2047
Prime Minister Modi has outlined the growth strategy for Amrit Kaal, named “Vision India @ 2047.” This vision marks the 100th anniversary of India's independence, with the ambitious goal of transforming India into a developed economy with a GDP of USD 30 trillion and a per capita income of $18,000 to $20,000 by 2047.

To achieve this the key areas of focus includes; Digital Economy and Technology - Modernising sectors like banking, retail, space, defense, and education. Infrastructure Development - Investing US$1.4 trillion by 2025 in urban and rural infrastructure. Human Resource Optimisation - Focusing on women and youth, with job creation remaining central. Agriculture and Food Processing - Emphasising crop diversification and growth in animal husbandry, dairying, and fisheries. Green Growth and Climate Action - Increasing renewable energy capacity and reducing carbon emissions. Research and Development - Partnering with foreign R&D organisations to elevate Indian institutions globally. By focusing on these areas, India aims to create a sustainable and inclusive growth trajectory, positioning itself as a leading global economy by 2047.

Learning from Australia and Small EU States
Australia's successful trade agreement with India serves as a model. Despite some unmet demands, Australia secured import duty cuts on 80% of its exports to India and leveraged advanced IT products developed in India for its industries. Indian investments in Australia’s renewable energy sector are also significant. Similarly, the European Free Trade Association’s long-term investment commitment to India illustrates the benefits of a strategic approach.

Conclusion
New Zealand, under the current government, has created momentum and a conducive environment for trade negotiations with India. Trade Minister Todd McClay’s recent follow-up visit to India, building on his meeting on sidelines of G7 with India’s Commerce Minister Piyush Goyal, demonstrates New Zealand’s commitment to engaging seriously with India.

It is important to note that India does not fit the traditional mould of free trade agreements. An approach that entails a CEP type agreement beyond an FTA, is more likely to work. India expects countries that want to trade with it to also invest in India for the long-term sustainability of its economy, and partner towards its vision 2047. This expectation is evident in initiatives like the Production Linked Incentive (PLI) Scheme, where the Indian government encourages foreign companies to produce goods locally by investing in India, using India’s workforce, creating jobs, and fostering the creation of micro-industries. Business groups from countries such as South Korea, the USA, Japan, France, Italy, the UK, and the Netherlands have participated in the first rounds of the PLI scheme. This should be a key focus for the upcoming trade delegation from New Zealand, where such routes can be explored for its agriculture and dairy industries, which have traditionally faced market access challenges in India. By aligning its trade strategies with India's Vision @2047 ambitions and supporting initiatives like the PLI scheme, New Zealand can pave the way for a robust and mutually beneficial relationship. It’s imperative to build on existing collaborations and explore new areas of cooperation, ensuring that both nations achieve their respective economic goals while fostering strong bilateral ties.

The authors are Senior Lecturer, Department of Economics and Finance, AUT University and Chair of NZIIA - Christchurch| Chapter Head of INZBC- Christchurch respectively. The views expressed here are personal and reflective of their research insights.