The first round of negotiations for the proposed India–Israel Free Trade Agreement (FTA) concluded in New Delhi on 26 February, aiming to expand bilateral trade and deepen economic cooperation between the two strategic partners. The four-day talks, held from 23 to 26 February, were conducted under the Terms of Reference (ToR) signed in November 2025, which laid out a structured framework for negotiations across key sectors.
The negotiations took place when Prime Minister Narendra Modi was on a state visit to Israel amid rising geopolitical tensions in the region. Addressing a Special Plenum of the Knesset in Jerusalem on 25 February, PM Modi called for the early finalisation of an ambitious FTA to unlock the untapped trade potential between the two countries.
In recent years, India has intensified its trade diplomacy, particularly following a public rift with US President Donald Trump. The government has actively signed free trade agreements with multiple countries and opened negotiations with several others, seeking to expand exports and secure critical supply chains. Experts believe this strategy shows New Delhi’s push to diversify beyond traditional markets, deepen integration into global value chains, and position India as a competitive hub for manufacturing and services.
In January 2026, India sealed a landmark FTA with the European Union, set to eliminate duties on 99.5 per cent of Indian exports. This follows the India–Oman CEPA in December 2025 and the India–UK FTA in July 2025, highlighting New Delhi’s push to boost exports, strengthen supply chains, and ease professional mobility. India is also negotiating with Peru for critical minerals and expanding trade ties with Mercosur and the Southern African Customs Union, signalling a renewed focus on both traditional and South–South partnerships.
India, Israel And Negotiations Across Sectors
During the first round, officials from both sides discussed a wide range of issues, including trade in goods and services, rules of origin, sanitary and phytosanitary measures, technical barriers to trade, customs procedures, intellectual property rights, digital trade, and other regulatory frameworks. The discussions were described as constructive and forward-looking, with both countries reiterating their commitment to negotiating a comprehensive, balanced and mutually beneficial agreement.
Union Minister of Commerce and Industry Piyush Goyal met the visiting Israeli delegation on 24 February and emphasised the need for close cooperation to unlock new opportunities in trade, innovation and growth. He encouraged negotiators to work towards a modern, comprehensive and future-ready agreement that reflects evolving economic realities and technological change. Both sides agreed to continue inter-sessional engagements virtually to maintain momentum. The next round of in-person negotiations is scheduled to take place in Israel in May 2026.
Bilateral merchandise trade between India and Israel stood at approximately USD 3.62 billion in FY 2024–25. Officials said there is significant untapped potential in sectors such as machinery, chemicals, textiles, agriculture, medical devices and advanced technologies. The proposed FTA is expected to provide a stable and predictable framework for businesses, boost trade flows and facilitate deeper integration of supply chains.
The progress in FTA negotiations aligns with the broader elevation of bilateral ties. During the Prime Minister’s visit, India and Israel agreed to upgrade their relationship to a “Special Strategic Partnership for Peace, Innovation & Prosperity.” Leaders highlighted complementary strengths: Israel’s technological innovation and India’s talent base, manufacturing capabilities and entrepreneurial ecosystem. Cooperation priorities include artificial intelligence, cybersecurity, semiconductors, quantum computing, biotechnology, agriculture, water management, defence platforms and space technologies.
The leaders also emphasised strengthening defence cooperation following the November 2025 MoU on defence collaboration, and advancing critical and emerging technology partnerships led by the two countries’ National Security Advisors. Both sides also agreed to increase the bilateral trade and investment flows. They welcomed the India–Israel Bilateral Investment Agreement, signed in September 2025, which aims to enhance investor confidence through transparent rules and dispute-resolution mechanisms.
In the fintech domain, Israel expressed interest in India’s Unified Payments Interface (UPI), and both sides agreed to explore linking UPI with Israel’s fast payment system. An MoU between NPCI International and MASAV will examine cross-border payment linkages to facilitate real-time transactions and strengthen financial connectivity.
Slowdown In Bilateral Trade
According to an analysis by Rubix Data Sciences, bilateral goods trade between India and Israel has contracted by more than 50 per cent over the past two financial years. As New Delhi and Tel Aviv indulge in FTA negotiations, it said total goods trade declined from a peak of USD 10.8 billion in FY2023 to USD 3.6 billion in FY2025.
India’s exports to Israel dropped from USD 8.5 billion in FY2023 to USD 2.1 billion in FY2025, effectively more than halving from FY2022 levels. Imports also fell steadily from USD 3.1 billion in FY2022 to USD 1.5 billion in FY2025. The contraction significantly narrowed India’s trade surplus with Israel, which fell from a peak of USD 6.1 billion in FY2023 to just USD 0.7 billion in FY2025, and further to USD 0.4 billion during April–December FY2026.
Rubix Data Sciences said the proposed FTA could play a pivotal role in reversing the decline by addressing tariff and non-tariff barriers, enhancing regulatory predictability and strengthening integration across technology-driven sectors.
“While headline trade volumes have declined, the underlying relationship is evolving in a more strategic direction. Technology collaboration, spanning agriculture, semiconductors, and advanced manufacturing, is emerging as a central pillar. The proposed FTA could accelerate this shift by enabling deeper integration across innovation-led sectors while restoring trade momentum,” Mohan Ramaswamy, CEO and Co-founder of Rubix Data Sciences, said.
The report noted that the early signs of stabilisation have emerged in FY2026. During the April–December 2025 period, exports to Israel rose by 9 per cent compared to the corresponding period a year earlier, while imports increased by 17.4 per cent, indicating a possible bottoming out after two years of contraction.
In FY2022, India’s exports to Israel were dominated by refined petroleum products, accounting for 34 per cent, and diamonds at 30 per cent. By FY2025, the export basket had changed markedly. Refined petroleum products no longer featured among the top five categories, while diamonds’ share declined to 26 per cent. Ceramic tiles emerged as a leading export category, accounting for 60 per cent among the top five products, alongside rice, aircraft parts and broadcast equipment components.
On the import side, a similar diversification is visible. In FY2022, diamonds accounted for 42 per cent of India’s imports from Israel, followed by potassic fertilisers at 34 per cent. Radar apparatus, crude oil and electrical integrated circuits made smaller contributions. By FY2025, diamonds’ share had fallen to 23 per cent. Electrical integrated circuits and telecom equipment gained prominence, while pesticides and insecticides entered the top import categories. Potassic fertilisers remained significant at 6 per cent.
Rubix Data Sciences said that while the recent contraction reflects volatility and shifting global conditions, the broader trajectory points to a maturing economic relationship anchored in technology and innovation. The success of the FTA negotiations, it added, could determine whether bilateral trade regains lost ground and enters a more resilient, innovation-driven phase. |
