New Zealand and India announced they had concluded a free trade agreement after nine months of negotiations, with the government promising tariff elimination or reduction on 95% of New Zealand's exports and access to a market of 1.4 billion people. Trade Minister Todd McClay framed it as a landmark deal to help double export value. From the outset NZ First leader Winston Peters signalled discomfort with the agreement's mobility provisions, setting up a split within the coalition.

Peters escalated his opposition publicly, characterising the agreement as "substantially an immigration deal" rather than genuine trade and pointing to Indian government statements describing "unprecedented" mobility for Indian professionals and students. He argued New Zealand had been more generous on migration with India than in any other FTA. The Spinoff reported the coalition cracks were widening, noting Peters' claim that the 5,000-person skilled-visa cap could translate to around 20,000 people once families were counted relied on existing immigration rules rather than new FTA text. Former ambassador Carl Worker called it "shameful" for a foreign minister to weaponise a partner government's messaging at home.

Prime Minister Christopher Luxon publicly rebuked his foreign minister, saying Peters "opposed the China FTA — he was wrong then, he's wrong on this one too", while McClay maintained there was "nothing about immigration in this agreement". A Spinoff fact-check found the truth was mixed: Peters' headline 20,000 figure leaned on existing family-accompaniment rules, but on the narrow question of whether the deal caps a visa category, Labour leader Chris Hipkins read the text as supporting Peters over McClay. The episode was widely seen as an unusually open clash between the two largest coalition partners.

The debate sharpened when NZ First MP Shane Jones, opposing the deal on Newstalk ZB, said New Zealand was "not going to be a dumping ground" for people wanting to "set up New Delhi" and did "not need any more Uber drivers". Peters said Jones "could have expressed himself better" but defended the party's stance on migration. Critics responded strongly: Labour leader Chris Hipkins called the language "totally unacceptable", Green co-leader Chlöe Swarbrick said NZ First was "ramping up its racist rhetoric", and broadcaster Jamie Mackay challenged Jones as racist on air. Jones rejected that, saying many New Zealanders shared his concerns.

After the FTA was signed in New Delhi on 28 April 2026 by McClay and India's Piyush Goyal with Luxon present, Labour confirmed it would back the enabling legislation despite reservations — meaning the bill can pass even with NZ First voting against. During the bill's first reading Peters opened a new front, alleging the government was "covertly" tightening immigration rules to "target Indians and Indians alone" with measures such as a labour-market test not applied to other FTA partners. McClay rejected this as "promoting misinformation for the sake of getting votes", and the briefing Peters cited remained unreleased pending an Official Information Act review. Labour's Damien O'Connor separately warned the US$20 billion investment target was "high risk" because concessions could be clawed back if it is missed.

Reaction is sharply divided: trade-focused commenters welcome lower tariffs and market access for exporters, many Indian-New Zealander voices and opposition supporters condemn NZ First's framing as racially charged, and NZ First supporters praise Peters for putting migration limits first.

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