Bilateral goods trade between India and Israel has contracted by more than 50 per cent over the past two financial years, underscoring the urgency of ongoing negotiations for a proposed Free Trade Agreement (FTA), according to an analysis by Rubix Data Sciences.
As New Delhi and Tel Aviv begin formal FTA negotiations, Rubix Data Sciences said total goods trade declined from a peak of USD 10.8 billion in FY2023 to USD 3.6 billion in FY2025, marking a sharp reversal in commercial momentum.
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.
Early Signs Of Stabilisation Emerge
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.
Beyond the headline numbers, Rubix Data Sciences highlighted a structural shift in the composition of trade, suggesting that the bilateral relationship is transitioning from traditional commodities towards higher-value manufacturing and technology-linked goods.
In FY2022, India’s exports to Israel were dominated by refined petroleum products, accounting for 34 per cent, and diamonds at 30 per cent. Other significant categories included radar apparatus, firearm components and broadcast equipment parts.
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.
Deepening Collaboration Between India And Israel
According to Rubix Data Sciences, this shift indicates that Israel is increasingly positioned as a source of high-value technology, agro-inputs and advanced components for India, rather than predominantly as a supplier of traditional commodities.
Institutional collaboration has also deepened, particularly in technology and innovation. The India–Israel Industrial R&D and Technological Innovation Fund (I4F), backed by a dedicated USD 40 million corpus with equal government contributions, supports joint research and development projects across sectors, including agri-tech, water, information and communication technology and energy.
The fund provides conditional grants of up to 50 per cent of project costs, higher for start-ups, covering stages from feasibility studies to pilot-scale commercialisation. Projects supported under the framework span solar-powered irrigation, smart groundwater monitoring, IoT-enabled precision agriculture and climate-resilient technologies.
Agricultural cooperation has expanded through Centres of Excellence established across more than a dozen Indian states. These centres, operating under successive work plans, showcase Israeli technologies such as drip irrigation, fertigation systems and protected cultivation. According to the report, they have trained over 3.6 lakh farmers and extension officers and supply high-quality planting material, with their impact scaled through a Villages of Excellence model.
Rubix Data Sciences said that recent collaborations in semiconductors, artificial intelligence, robotics and cybersecurity further demonstrate that the partnership is increasingly defined by co-creation and integration into global value chains.
Against this backdrop, the proposed FTA is expected to cover trade in goods and services, rules of origin, sanitary and phytosanitary measures, technical barriers to trade, customs facilitation and intellectual property rights. Beyond tariff reductions, the focus includes technology transfer, value-chain integration and predictable market access for businesses, particularly micro, small and medium enterprises.
For businesses, the evolving trade and investment landscape signals opportunities aligned with advanced manufacturing, digital technologies and innovation-led sectors, where India’s scale and Israel’s technological capabilities offer complementarities.
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. |
