India-New Zealand Free Trade Agreement Could Offset at Least 12% of India's Gulf Exports

India and New Zealand Sign Free Trade Agreement Amid Ongoing Strait of Hormuz Disruptions

India and New Zealand signed a free trade agreement (FTA) on April 27, marking the conclusion of 13 months of negotiations. The pact is expected to significantly boost bilateral trade, with Wellington offering zero-duty access to 100 percent of Indian exports.

Under the agreement, New Delhi has agreed to eliminate tariffs on 70 percent of tariff lines, covering about 95 percent of New Zealand's exports by value. However, sensitive sectors such as dairy have been kept outside the agreement.

The FTA is expected to provide a much-needed boost to India's trade, particularly in the wake of ongoing disruptions in the Strait of Hormuz. According to a Moneycontrol analysis of trade data, New Zealand could absorb at least 12 percent of India's exports currently exposed to the Strait of Hormuz if disruptions persist.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The analysis found that among the most exposed product categories routed through Hormuz are medicaments, worth $417.2 million, and cosmetics and toilet preparations, worth $267.3 million. Other product categories that could see significant demand in New Zealand include food preparations ($119.2 million), industrial machinery ($98.8 million), excavators and earth-moving equipment ($95.6 million), and vehicle parts ($88.5 million).

New Zealand shows the strongest potential demand in selected manufactured and consumer goods categories. It could absorb exports worth $603.1 million in turbo-jets, $390.8 million in communication apparatus, and $384 million in food preparations.

Other categories with relatively high replacement potential include medical and surgical instruments ($305.6 million), aluminium oxide exports ($257.8 million), cosmetics ($194.6 million), plastic articles ($175.8 million), toys and scooters ($160.9 million), electrical static converters ($142.5 million), and iron or steel structures ($135.7 million).

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Trade diversification benefits remain limited in the near term, with the New Zealand market currently capable of offsetting less than 2 percent of India's total exports. However, India's expanding export basket could improve that over time.