The agreement will eliminate or reduce tariffs on 95 per cent of New Zealand's exports to India with more than half of the products to be duty free on day one of the pact, while all Indian goods would have duty free-access to New Zealand.
New Zealand also agreed to invest $US20 billion ($A30 billion) in the Asian country in the next 15 years.
Prime Minister Christopher Luxon said an FTA with India is a landmark moment for New Zealand.
"The gains are wide-ranging and significant," Luxon said in a statement.
"India is the world's most populous country and is the fastest-growing big economy - and that creates opportunities for jobs for Kiwis, exports and growth," he added.
Luxon said he had spoken to India Prime Minister Narendra Modi, "who shares our excitement to further cement the strong relationship".
The deal makes good on a 2022 election promise from the governing National party that if elected it would finalise a New Zealand-India free trade agreement in its first term.
Two-way trade between the two countries totalled about $US1.81 billion in 2024, dominated by pharmaceuticals from India and forestry and agricultural products from New Zealand. The size of the trade between the nations is dwarfed by India's total goods trade which exceeded $US1 trillion in the 2024-25 financial year (April-March).
"Concluded in just nine months, this historic milestone reflects a strong political will and shared ambition to deepen economic ties between our two countries," Indian Prime Minister Narendra Modi said in a social media post.
The Indian government said the free trade deal excluded market access to dairy, coffee, milk, cream, cheese, yoghurt, whey, caseins, onions, sugar, spices, edible oils and rubber, to protect its farmers and domestic industry.
India has been accelerating talks with partner countries to diversify its exports after Washington imposed a 50 per cent tariff on Indian goods entering US markets.
The trade deal with New Zealand is the third this year, following an economic partnership agreement with Oman announced on Thursday and one with United Kingdom in May.
The countries expect to sign the agreement in the first half of 2026, the New Zealand government said.
But New Zealand's parliamentary approval was not immediately assured. New Zealand First, with which National have a coalition and which holds eight of the 123 seats in parliament, would vote against the deal, said leader Winston Peters.
The coalition has 67 seats, but the Nationals only have 48 and rely on support from coalition partners, including NZ First.
The deal "gives too much away, especially on immigration, and does not get enough in return for New Zealanders, including on dairy", Peters said in a statement.
with AAP
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