The deal comes as New Delhi moves to diversify export markets to offset the impact of steep tariffs imposed by the United States and instability in shipping and energy routes due to the Iran war.
For New Zealand, the agreement is part of a broader push to reduce reliance on China, its largest trading partner.
The agreement was signed in New Delhi on Monday by India's Commerce and Industry Minister Piyush Goyal and visiting New Zealand Trade and Investment Minister Todd McClay.
Negotiated over nine months and agreed in December, the deal will cut or eliminate tariffs on 95 per cent of New Zealand's exports to India, while making all Indian exports to New Zealand duty-free.
Wellington has also committed to invest $US20 billion ($A28 billion) in India over the next 15 years.
McClay said the deal marked a "once in a generation" opportunity to deepen economic ties at a time of rising global trade tensions and uncertainty.
India is New Zealand's 12th-largest export market, with bilateral trade valued at $US2.15 billion in the year through June 2025, according to official data.
Goyal called the deal a "defining milestone" and said India and New Zealand had "chosen each other" at a time "when the world economy is being recast".
He said the agreement offers market access across sectors and creating frameworks for investment and regulatory co-operation.
Indian sectors expected to see expanded market access include textiles and apparel, engineering goods, leather and footwear, and marine products. New Zealand is likely to register increased exports in horticulture, timber, coal, wool and meat.
India has excluded dairy and certain agricultural products from the deal to protect its farming sector.
Indian exporters have been under pressure from higher US tariffs since August 2025, particularly in labour-intensive sectors such as textiles, auto components and metals, even as New Delhi continues negotiations with Washington on a separate bilateral agreement.
New Zealand's trade deals are usually bipartisan.
The agreement now requires ratification by parliament and is expected to pass after the opposition New Zealand Labour Party backed it, despite resistance from coalition partner and populist minor party New Zealand First.
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