‘Just start trading’: how to open the door to India

“Forget a free trade deal and get on with doing business.” That’s the advice from leading think tanker and public policy expert Dr Reuben Abraham for New Zealand businesses wanting access to the world’s fastest growing large economy.  

Despite National Party leader Christopher Luxon championing a free trade agreement with India before forming his coalition Government, Abraham says the chances are “slim, in my opinion”.

“I’ve been saying this for nearly 15 years – stop obsessing about a deal and start trading. These two things are not dependent on each other. You can have trade without a trade deal. I said the same thing when giving a talk in New Zealand in 2010,” said the London-based Abraham.

India has changed dramatically and is now the world’s fifth largest economy, will be the third largest in the next five years, and could be second only to China in economic size by 2050, according to a Cabinet paper released by the Ministry of Foreign Affairs and Trade in December 2023.

There is a simple reason why a trade deal is unlikely, he says. “From an Indian perspective, what it basically implies is free and unfettered access to a market of 1.4 billion people. But in return for what? Free and unfettered access to five million people? That makes sense for New Zealand, but how does it make sense for India?”

What about New Zealand’s free trade deal with China, you may ask.

Abraham says that is a wrong comparison to draw because the Chinese trade deal happened at a time (2008) when the Chinese needed experience with doing trade deals, and a deal with New Zealand was a great starting point.

It happened when income levels in China had got to the point where there were inevitable dietary shifts from carbohydrates to protein, but there were no major protein producers, especially dairy producers.

“Today’s India is very different,” he says. “Though new data clearly shows a similar move away from carbohydrates to protein, the difference is that India has a very large dairy industry. It is the world’s largest producer of milk.”

Abraham argues that there is a lot more to New Zealand than just the dairy industry and there is so much more trade that can happen.

“India does not have a free trade deal with any of its major trading partners either, not with the US, the UK, the EU, Germany or China.”

Tourism numbers also tell the story, he says. “New Zealand gets a fraction of the [Indian] tourists that go to Australia (70,000 vs 385,000). There are nearly 400,000 Indian tourists who go to Switzerland each year, and they’re among the highest spenders there.”

Australia signed its own trade deal with India in 2022, delivering new market access opportunities for businesses and consumers. Called the Economic Cooperation and Trade Agreement (ECTA), over 85 per cent of Australian goods exports by value to India are tariff free, rising to 90 per cent by 1 January 2026. In addition, 96 per cent of imports from India are now tariff free, rising to 100 per cent by 1 January 2026.

“That deal happened because the Aussies started by doing business and over time landed a preferential deal. What New Zealand seems to want is, ‘Let’s have the trade deal first, then we’ll do business’.

Abraham is no stranger to New Zealand, having visited many times, the last time in December on holiday where he had a few encounters with the financial systems and its inefficiencies.

“New Zealand has missed a large part of the fintech bandwagon, even though there’s a lot of technological capability. The problems of paying with cards without all these surcharges are a good example,” he says.

“Every time I do a financial transaction in India or the UK, basically I can do it without excessive fees and surcharges. I just had a holiday in New Zealand, renting a number of large houses for multiple weeks, and you see the surcharges add up. It’s crazy, to have five per cent surcharges if you use a credit card.

“There is neither the sort of digital public infrastructure buildout such as in India, Brazil or Estonia (which enables banking in real time, instantaneous settlement of payments at very close to marginal cost), nor the regulatory pressure to cap fees, such as in the UK.

“Both options enable low-friction, low-fee commerce that is hugely beneficial to consumers and small and medium businesses, and New Zealand should seriously consider them. Otherwise, you end up with consumers bearing these huge fees and most likely fewer commercial transactions.”

This conflicts with New Zealand’s reputation as a country that cares deeply about fairness and looking after its people, he says. “We must not forget that a surcharge is effectively a flat tax. These fees hits the poor just as much as the rich.”

Abraham says Brand New Zealand is underpowered, given everything it has going for it. “Above all, it has a tonne of well-wishers around the world. I have never met a person who has visited New Zealand and come away without a very positive impression. That sort of brand image and equity has not been adequately leveraged, in my opinion.”

Poor productivity may be an issue but he says there is a larger problem – or question. “What does New Zealand want?”

“My friends who were with me on holiday in New Zealand included CEOs of a couple of big firms. They asked the one question I had no answer for, ‘What does New Zealand want, especially on the global stage?’

“In 15 years of visiting New Zealand, I’ve never got a clear answer to that question. If I ask a Singaporean policymaker, it’s likely I will get a very clear response.

“This is the problem for well-wishers like me, who want to see New Zealand play a much bigger role in the world, but where do we even start this conversation?

“The bottom line here is you’ve got this tiny little island, Singapore, which has the exact same population and twice the GDP. How is that possible? The island state doesn’t have any resources.”

Dr Reuben Abraham is the CEO of Artha Global, a Mumbai- and London-based policy and research organisation. He is a Senior Fellow at New York University’s Marron Institute, a member of the UAE’s International Advisory Council on the New Economy and Senior Advisor to Swiss Re in Zurich. He is an Asia Fellow at the Milken Institute in Singapore and an Honorary Adviser to the Asia New Zealand Foundation in Wellington. In 2022, he was awarded “Think Tanker of the Year” by the UK’s Prospect Magazine for his efforts at tackling the Covid crisis in India and, in 2023, he won the Schmidt Innovation Fellowship. 

Dr Reuben Abraham will be speaking at the Institute of Directors 2024 Leadership Conference. His session is sponsored by the Asia New Zealand Foundation - Te Whītau Tūhono.

13 - 14 May at Te Pae Convention Centre, Ōtautahi, Christchurch.

To find out more about the event, or to register, head to the website.