India and New Zealand on Monday announced a free trade deal that will make a majority of the goods trade between the two countries duty free.

The trade pact, which will be reviewed after one year, will be signed in the first half of next year.

“This historic agreement eliminates and reduces tariffs on 95% of New Zealand’s exports,” New Zealand Trade and Investment Minister Todd McClay said in a statement, adding that nearly 57% of exports from the country will become duty-free in India “from day one.”

The pacific island nation will also invest $20 billion in India over next 15 years and allow mobility of professionals, skilled labor and students from India to New Zealand, according to a statement from India.

India has also secured a “zero duty market” on all its exports to New Zealand that includes textiles, apparel, leather, footwear, marine products, gems and jewelry, handicrafts, engineering goods and automobiles.

 “Today this Free Trade Agreement is about building trade around people and launching opportunities,” India’s Commerce Minister Piyush Goyal said.

The deal will give Indian businesses and youth an opportunity to “learn, work and grow on a global stage,” he added.

India will eliminate tariff on sheep meat, wool, coal and nearly all of forestry and wood exports. New Delhi will also allow duty-free access for dairy and other food ingredients for re-exports.

However, to ensure protection to farmers and the domestic industry, New Delhi has said the market access excludes dairy, coffee, milk, cream, cheese, yoghurts, whey, caseins, onions, sugar, spices, edible oils, rubber.

India’s trade pact with New Zealand “provides policy certainty and lowers input costs for manufacturing, creating a vision for long-term economic resilience,” said Ranjeet Mehta, chief executive officer and secretary general, of Indian industry body PHDCCI.

Bilateral merchandise trade between the two countries stood at $1.3 billion in 2024–25 while total trade in goods and services was $2.4 billion in 2024. “The FTA provides a stable and predictable framework to unlock the full potential of this relationship,” India’s commerce ministry said.

The FTA marks India’s third deal this year followinga free trade agreement with the UK in July and another pact with Oman earlier this month.

The deals comes at a time when the U.S., New Delhi’s largest trading partner, has levied 50% tariffs on its goods exports, that includes 25% duties for India’s purchases of Russian oil.

India, which has ambitions to become an export powerhouse, has been looking to diversify its exports to make up for the impact of U.S. tariffs.

After steep tariffs came into force in August, India’s exports to the U.S. fell nearly 12% in September and 8.5% in October, before a sharp growth of 22.6% in November.