Despite the over-riding optimism shown by many, the possibilities of a Free Trade Agreement (FTA) between New Zealand and India appear remote.
As mentioned in our previous reports on the subject, a free-trade pact between the two countries would necessarily involve removal of tariffs on agricultural and dairy products, which is allergic to the Indian Government.
New Delhi says agriculture is livelihood for India but trade for New Zealand, whereas Wellington insists that trade is this country’s livelihood.
There are many imponderables that should be addressed carefully.
With India facing a general election in May 2014 (if not sooner), issues like FTA would move to the backburner.
However, a comprehensive free trade deal would eventually become a reality, although no one in the two governments would hazard suggesting a timeframe.
Broad insight
ANZ is perhaps the only bank in this country, which understands India, its economy, government machinery and its psyche better than any other organisation of its type and size. The Bank’s recent study, called, A Closer Look at India,’ provides a broad insight into the state of the economy, existing and emerging prospects and the challenges and problems facing foreign investors and companies.
According to its authors Sunil Kaushal (Head of India Relations), 
Mark Smith (Senior Economist) and Con Williams (Rural Economist), India represents a massive market with a huge potential for New Zealand and that a free-trade pact would boost this country’s export sector.
“One-off gains to exports could amount to around 1.1% of GDP. These will take a long time to cumulate, although the China experience suggests that the upside should never be understated.
“Given its demographic advantages, India looks set to become a bigger player on the world stage, but its low income levels suggest that it will be some time before India becomes as influential as implied by its population size,” they said.
Insignificant partner
Mr Kaushal said that India would experience infrastructure challenges and growing pains as the country moves towards a modern and competitive economy.
According to the Report, New Zealand remains insignificant in India’s trade map, accounting for no more than 0.2% of its imports and 0.1% of its exports.
India’s exports to New Zealand has declined in recent years, compared to the figures registered about 40 years ago, but its imports from this country have been rising.
“By virtue of its size, India is our 15th largest trading partner, with overall merchandise trade between the two countries valued at $1.2 billion in 2012, of which $790 million were New Zealand exports, making India our 13th largest export destination. With 1.2 billion mouths to feed, and New Zealand being a food exporter, the natural area to target will be food,” Mr Kaushal said.
But Mr Smith said that agriculture constitutes less than one quarter of our exports.
“Coal exports (categorised as ‘Other’) have led the increase in New Zealand trade with India in recent years, with forestry also a major growth sector; both now account for nearly three quarters of total merchandise exports. Dairy and wool are the two major agricultural exports, with the latter (an input into Indian carpets), declining in relative importance,” he said.
Emerging potential
‘A Closer look at India’ recognised huge potential that India offers to the education, tourism and entertainment sectors.
Mr Williams said that India’s trade in services is much smaller than goods (around one quarter of total trade) but is rapidly growing.
“By virtue of its low cost base, India is a growing hub for software development and lower-value added financial services. The Indian outbound travel market has expanded steadily in recent years, rising from four million persons at the start of the millennium to more than 10 million now. The Indian film industry is multi-lingual and is the world’s largest in terms of ticket sales and number of films produced, though much smaller than the US in terms of revenue,” he said.
Services sector
The Report placed India as the 10th largest market for New Zealand’s table of overseas visitors, with around 29,800 visitors in the 2012 year (1.2% of the total number of visitors, up from 0.4% in 2000.
“With Indian visitor numbers heavier during their summer, they are a valuable source of visitors for New Zealand’s autumn shoulder season. There has been steady growth in New Zealand’s services trade with India, most notably in tourism and education.
“India is one of New Zealand’s fastest growing education markets, with around 12,000 Indian students in New Zealand in 2012, about double the number in 2008,” the Report said.
Read related report in this section. A further analysis of ‘A Closer look at India’ will appear in our next issue. ANZ is the Title Sponsor (jointly with Radio Tarana) of the Indian Newslink Sir Anand Satyanand Lecture, scheduled to be held at Stamford Plaza Hotel, Auckland from 630 pm on Monday, July 29, 2013. Vino Ramayah, Executive Chairman of Medtech Global Limited will be the Guest Speaker, with ‘Transparency: Myth or Reality’ as the theme of his address. For more details write to editor@indiannewslink.co.nz
