Key: High hopes for free trade with India

Prime Minister John Key says his fingers are crossed that a free trade agreement with India will become a reality sooner after his meeting with India's Prime Minister went better than he expected.

Mr Key met with Indian Prime Minister Manmohan Singh yesterday and Dr Singh expressed very strong support for a free trade agreement after the meeting, saying he hoped to see trade between the two countries "expand significantly."

Mr Key said he believed the end to negotiations on the deal was now a lot closer as a result of the trip of his trip. Dr Singh's comments were very encouraging.

"So, fingers crossed, we are closer to an FTA with India. We shouldn't kid ourselves that it will be straightforward and easy travelling, because there are always issues. But I'm more confident than I was when we arrived that we will get the deal signed."

A free trade agreement is expected to increase two way trade between the countries from $1.3 billion to $3 billion by 2015 and both sides are aiming for a 2012 signing. Fonterra has estimated it could be as valuable to the dairy industry as China.

Mr Key said he remained cautious about potential barriers to the agreement. However, Dr Singh also included dairy and agriculture in the areas he believed further trade could take place. India is keen to benefit from New Zealand's technology on farming to increase its own productivity, while New Zealand will want the phase out of stiff tariffs on imports to India - something that could be politically unpopular domestically.

India's Commerce Minister Anand Sharma has also said India hopes to benefit from New Zealand expertise in agriculture to boost its own productivity. Mr Key said New Zealand had done everything it could to progress the agreement.