NZ-India FTA: 1.4B consumer fiction hides state risk

The New Zealand–India free trade agreement signed last month opens preferential access to a market larger than the European Union and ASEAN combined. The headline number – 1.4 billion potential consumers – dominates the coverage. That number is the source of the risk.

The simple read is that New Zealand exporters just gained a tailwind for dairy, meat, horticulture, education, and tourism. The better read is that the FTA rewards businesses that treat India as 36 distinct markets and punishes those that do not. State-level policy differences in land, labour, licensing, and infrastructure mean a single national strategy is a high-probability failure.

For NZ-listed companies with India exposure – including Fonterra, A2 Milk, Scales Corp, and education providers – the risk event is not the FTA signing. It is the execution gap between signing and results. A concentrated bet on one state or one relationship amplifies downside if the operating environment shifts.

This article maps the real risk: where the headline opportunity meets the ground-level fragmentation, and how to judge whether an exporter is positioned for the long game or just buying the headline.

The FTA Signal and the Trap

The FTA reduces tariffs on key NZ exports over a transition period. That is mechanically positive. A more complex layer lies beneath. India ranks 63rd on the World Bank ease-of-doing-business index, versus New Zealand at 1st. The gap is not narrow. Doing business in India requires navigating permitting delays, opaque regulation, and relationship-dependent enforcement.

The trap is mistaking tariff relief for market access. Tariffs are only one layer. The real barriers are at the state level: how quickly a licence clears in Maharashtra versus Kerala can differ by months. Infrastructure quality, labour laws, and local political dynamics vary so widely that a product profitable in one state may be uneconomical in another.

GDP vs Ease of Doing Business Disconnect

India's constitution gives states control over land, labour, healthcare, transport, licensing, and permitting. Each of the 36 states and union territories functions as a semi-autonomous economic zone. Economic output and ease of doing business do not align.

Only Gujarat and Uttar Pradesh appear on both lists. An NZ exporter targeting Maharashtra for its large consumer base faces a regulatory environment that is not among the friendliest. Andhra Pradesh offers better ease of doing business but a smaller market. The trade-off must be calibrated per business.

Why a Pan-India Strategy Fails

The most dangerous assumption an NZ exporter can make is that a strategy built for Mumbai will work in Chennai or Lucknow. Cultural expectations, relationship norms, and negotiation styles differ.

State-Level Decision Areas

• Infrastructure development (port congestion, warehousing, cold chain)
• Land acquisition rules and rental markets
• Labour law enforcement and union activity
• Health and safety standards enforcement
• Transport connectivity to distribution hubs
• Licensing and permit processing time

Each factor alters the cost and timeline of market entry.

Relationship Dependency and Cultural Intelligence

Research cited in the source notes that NZ managers who built family-level relationships with Indian trade partners sustained business during downturns. That same closeness can become a liability: it can create an aversion to conflict, discourage fresh competition, and enable lax oversight.

New Zealand ranks first globally on ease of doing business partly because of trust in institutions and contract enforcement. India operates on relationship-based trust. Expecting identical rhythms, pacing, and transparency will cause friction. The source warns that "expecting things to happen like they do in New Zealand won't work" – a direct cause of lost opportunities and damaged relationships.

Practical rule: Treat each Indian state as a separate market. A pan-India strategy is a risk, not a plan.