India and Israel have started the first round of negotiations for a Free Trade Agreement (FTA) in a bid to boost commercial ties and promote investments. An official said the four-day talks will conclude on February 26. In November last year, the two countries signed the terms of reference to formally begin negotiations for the pact. In such agreements, both sides significantly reduce or eliminate import duties on most traded goods. These pacts also ease norms to promote trade in services and encourage bilateral investments.
The terms of reference include market access for goods by eliminating tariff and non-tariff barriers, investment facilitation, simplification of customs procedures, increasing cooperation for innovation and technology transfer and easing norms to promote trade in services. The ongoing negotiations hold major significance as Prime Minister Narendra Modi is scheduled to visit Israel on February 25 to 26.
Past negotiations stalled after eight rounds
India and Israel were earlier engaged in similar discussions. Eight rounds took place, but talks stalled later. The last round was held in October 2021. With the new phase of negotiations, both sides have resumed efforts to reach an agreement.
Bilateral trade sees a dip amid renewed push for FTA
During 2024 to 25, India's exports to Israel fell 52 per cent to USD 2.14 billion from USD 4.52 billion in 2023 to 24. Imports also declined 26.2 per cent to USD 1.48 billion last fiscal year. The bilateral trade stood at USD 3.62 billion. India is Israel’s second-largest trading partner in Asia.
Although bilateral merchandise trade is dominated mainly by diamonds, petroleum products and chemicals, recent years have seen a rise in electronic machinery, high-tech products, communication systems and medical equipment.
India's export and import basket expands beyond traditional goods
Major exports from India to Israel include pearls and precious stones, automotive diesel, chemical and mineral products, machinery and electrical equipment, plastics, textiles, apparel, base metals, transport equipment and agricultural products. Imports from Israel include pearls and precious stones, chemical and mineral or fertiliser products, machinery and electrical equipment, petroleum oils, defence items, machinery and transport equipment.
Union Commerce and Industry Minister Piyush Goyal had said in November in Tel Aviv that "The FTA will open the doors for greater market access, flow of capital, both in goods and services, remove obstacles in doing business, provide clarity and predictability to our economic engagement."
Investment agreement strengthens economic linkages
In September last year, both countries signed a bilateral Investment Agreement under which India reduced the local remedies exhaustion period for Israeli investors to three years from five years. Between April 2000 and June 2025, India received USD 337.77 million in foreign direct investment from Israel. Israel is a high-income, technology-driven market with a population of under ten million.
