India–NZ FTA Lets Dairy Be Processed Here, Not Sold Locally
The recently announced India–New Zealand Free Trade Agreement (FTA) has clarified a key concern for India’s dairy sector: while tariff concessions and broader trade cooperation have been agreed upon, India has ruled out opening its domestic dairy market to direct imports from New Zealand. Consumer Affairs & Food Minister Piyush Goyal emphasized that the pact enables dairy processing for re-export purposes, but does not allow the domestic sale of imported dairy products in India, defending both farmer interests and the protective policy stance for India’s smallholder-driven dairy economy.
Under the agreement framework, New Zealand — one of the world’s most export-oriented dairy producers — will gain wider access to cooperate with Indian processing entities to import dairy inputs that can be value-added or re-exported from India to third markets. However, this provision is carefully structured to avoid direct competition with India’s domestic milk and dairy processing market, which is the backbone of rural incomes and heavily integrated with over 8 crore smallholder producers through cooperative and private procurement systems.
The policy nuance is significant. While many stakeholders anticipated some form of market-opening for imported fluid milk or consumer-ready dairy products, the government’s position is that protective measures remain in place to ensure domestic farmer security and price stability. Instead, the FTA’s dairy chapter is oriented toward global value chain integration — enabling Indian processors to leverage imported dairy components from New Zealand for value-added manufacturing and export positioning, particularly in high-value powder, ingredient and specialised niche segments.
This aligns with broader trade strategy trends where India is seeking to expand its role in re-export markets while safeguarding domestic production integrity. Under the FTA, certain tariff lines can be flexibly managed to encourage processing-linked trade, allowing Indian dairy firms to import key inputs such as whey proteins, caseinates or specialised milk powders from New Zealand, process them into finished or semi-finished goods, and ship them to Europe, Africa or Southeast Asia under preferential tariff treatment.
Industry analysts see this as a pragmatic compromise — balancing global engagement with local producer protection. India’s massive dairy market, characterised by one of the most diffuse and resilient dairy production bases globally, has historically resisted full liberalisation. By focusing on processing for value addition and re-export, the pact aims to create export-linked growth opportunities without subjecting Indian farmers to direct import competition.
For dairy stakeholders, the implications are two-fold: first, the agreement could stimulate technological collaborations, quality certification alignment and scale efficiencies as Indian processors integrate imported dairy inputs into their supply chains. Second, it opens a pathway for India to become a regional dairy processing hub, leveraging geographical advantages and a large internal dairy workforce, while servicing demand in third-country markets.
In summary, the India–New Zealand FTA has walked a fine line — expanding trade cooperation in dairy processing and re-export potential, while firmly maintaining protection for the domestic dairy market. As implementation proceeds, clarity around tariff adjustments, product segmentation and export facilitation will be critical to unlocking the agreement’s full value for India’s dairy sector.
Source : DAirynews7x7 Dec 24th 2025 TOI