NZ to dust off India FTA following Modi win

Narendra Modi
Prime Minister John Key

The New Zealand government will dust off the stalled initiative for a free trade agreement with India, following the election of a new Indian government promising an economic reform agenda more likely to be welcoming of foreign trade and investment.

The Bharatiya Janata Party, led by Narendra Modi, won the Indian general election over the weekend, becoming the first government in a generation to gain a clear majority without requiring coalition partners.

Modi is a former governor of the 60 million-strong state of Gujarat, where he pursued a combination of economic liberalisation and foreign direct investment initiatives that have seen the state become the hub for 25 percent of Indian exports.

Formal negotiations for an FTA with India began in 2010 after a Prime Ministerial trade mission to the world's second most populous country after China, but the talks stalled amid Indian domestic political opposition to the presence of foreign-owned firms in the food and fast-moving consumer goods sectors.

Prime Minister John Key said at his post-Cabinet press conference today that he had sent a message of congratulation to Modi and that the government was "hopeful we can reignite the FTA."

"We will be taking that up with the Indian government at the appropriate time."

In an editorial today, The Asian Wall Street Journal warned the Modi administration would need to "build ideological consensus to reverse India's deep-rooted distrust of markets."

"If Mr Modi pursues industrial policy rather than pro-market reforms, he may revive growth over the next few years," the AWSJ says. "But he would also create a web of crony capitalism that leads back to stagnation in the longer term."

While still growing at around 5 percent annually, the Indian economy has under-performed against expectations and is failing to create sufficient jobs for the 12 million new workers entering its labour market annually.


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