India and Israel Sign Terms of Reference for Proposed Free Trade Agreement

India and Israel have signed the terms of reference (ToR) for negotiations on a proposed Free Trade Agreement (FTA), marking a significant step towards deeper economic integration. The ToR was signed in Tel Aviv by India’s Commerce and Industry Minister Piyush Goyal and Israel’s Economy Minister Nir Barkat.

Complementary Economic Strengths

CII President Rajiv Memani highlighted the strong complementarities between India and Israel, noting limited competition across sectors in an interview to CNBC TV18. He described the bilateral relationship as “strong” and rooted in trust, with both nations bringing unique strengths to the table. Israel is recognised as a leading high-tech startup hub, while India is emerging as a scale-up powerhouse, creating scope for collaboration in advanced manufacturing, AI and emerging technologies.

Focus on Innovation and Sustainability

Israel spends 6.5% of its GDP on R&D and has the highest proportion of researchers per thousand people globally, making it an attractive partner for India’s innovation-driven growth. Memani also pointed to opportunities in water management, agriculture and energy transition, alongside defence cooperation given India’s rising defence expenditure and Israel’s high defence-to-GDP ratio.

Trade and Strategic Corridors

Memani described the India–Middle East–Europe Economic Corridor (IMEC) as a “powerful concept” but stressed that geopolitical stability in West Asia is critical for its success. He noted that India has established FTA frameworks with blocs like EFTA and is negotiating with the US, EU and UK. The challenge lies in managing multiple negotiations simultaneously, though FTAs remain a strong sovereign-to-sovereign mechanism for building trust and integration.

Bilateral Trade Snapshot

Despite strategic alignment, bilateral trade between India and Israel remains modest. In FY24–25, India’s exports to Israel fell 52% to $2.14 billion, while imports declined 26.2% to $1.48 billion. Total trade stood at $3.62 billion, underscoring the potential for growth through an FTA. India is currently Israel’s second-largest trading partner in Asia.

Read More: India Issues 80 Lakh E-Passports Since Rollout.

Conclusion

The signing of the ToR signals intent to deepen economic ties between India and Israel through a comprehensive FTA. With complementarities in technology, defence and sustainability, the partnership offers significant scope for expansion. Industry leaders expect the agreement to strengthen innovation ecosystems and boost bilateral trade. However, progress will depend on negotiation bandwidth and regional stability.

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