New Zealand is negotiating an FTA with India and Key's visit to Delhi last week was mainly aimed at progressing the talks with the aim of striking a deal by March.
Indian Commerce and Industry Minister Anand Sharma was defensive about the child labour problem when asked on TV One's Question and Answer Programme on Sunday.
"We have the laws, we have the best practices, and we have the institutions to implement the laws. India does not encourage, India has forbidden child labour. We are a rule-based and rule-governed country. People should understand the complexities of India's situation and not try to mock at us," he said.
He disagreed it should be dealt with in the FTA.
"That's insulting to India. India does not allow any extraneous matters. There are other platforms to discuss this, not in trade negotiations."
Key told the Breakfast television programme on the same channel that New Zealand raised such issues frequently.
"We certainly raise those issues all the time... that's not the forum that you actually incorporate those changes, that's through the International Labour Organisation," Key was quoted saying.
Key was quoted saying India was making a lot of progress and being a very large market of 1.2 billion, it would take some time for it to administer the law against child labour.
Key was upbeat about the chances of a FTA but said agriculture would be a sticking point given 60 percent of India's population worked in the sector.
Since the FTA with China two-way trade had reached $13 billion. With India it was $1 billion.
Key was also unconcerned that a deal could see more outsourcing, putting jobs at risk as more manufacturers in New Zealand struggled to succeed. -- Source: Otago Daily Times