What Happened
- India and Israel commenced the first round of formal Free Trade Agreement (FTA) negotiations in New Delhi on February 23, 2026, scheduled to run until February 26.
- Technical experts from both sides are engaging in sessions covering trade in goods, trade in services, rules of origin, sanitary and phytosanitary (SPS) measures, technical barriers to trade (TBT), customs facilitation, intellectual property rights, and investment.
- The negotiations follow the signing of Terms of Reference (ToR) in November 2025, formally authorising FTA talks.
- Prime Minister Modi is undertaking a State visit to Israel on February 25–26, with discussions expected to provide political direction to the FTA process; an interim agreement may be signed during the visit.
- Current bilateral trade stands at approximately USD 3.62–6.53 billion (excluding defence); Israel has agreed to USD 8.6 billion in arms deals with India in 2026, making it India's second-largest defence supplier after France.
Static Topic Bridges
India-Israel Bilateral Relations — History and Milestones
India and Israel established full diplomatic relations in January 1992, ending decades of India's policy of not formally recognising Israel (influenced by solidarity with Arab nations and the Palestinian cause under the Non-Aligned Movement). Since 1992, relations have grown rapidly, particularly in defence, agriculture, water technology, and more recently, strategic cooperation.
- Full diplomatic relations established: January 1992
- PM Modi's 2017 visit to Israel: first visit by an Indian head of government to Israel; elevated the relationship to a "Strategic Partnership"
- Strategic Partnership: covers defence, agriculture, water technology, innovation, and science & technology cooperation
- Key defence cooperation: India is Israel's largest defence market; Israel's Aerospace Industries (IAI), Rafael, Elbit Systems supply UAVs (Heron), missile systems (Barak, Spyder), anti-tank missiles (Spike), and air defence radars to India
- 2026 development: Israel agreed to USD 8.6 billion in arms deals with India, including potential access to Iron Beam (laser-based air defence) and advanced sensors
- IMEC (India-Middle East-Europe Economic Corridor): India-Israel connectivity through IMEC is a strategic priority, with Israel serving as a potential hub in the corridor linking India to Europe via the Middle East
- Terms of Reference for FTA: signed November 2025; formal negotiations launched February 2026
Connection to this news: The FTA negotiations represent the economic dimension of a maturing strategic partnership — both sides recognise that trade in goods/services has lagged far behind the defence and technology relationship, and the FTA aims to address this imbalance.
Free Trade Agreement Components — What Gets Negotiated
A comprehensive FTA involves multiple negotiating "chapters," each covering a distinct aspect of trade and economic relations. For UPSC, understanding what each chapter covers is important for analysing the significance of any trade deal.
- Trade in goods: Tariff schedules — which goods get duty eliminated or reduced, timelines, and sensitive list exclusions; Rules of Origin define what counts as "made in" a country for tariff purposes
- Trade in services: Market access commitments under four modes (Mode 1: cross-border supply; Mode 2: consumption abroad; Mode 3: commercial presence/FDI; Mode 4: movement of natural persons); India has strong offensive interests in IT services, healthcare, and education
- Investment: FDI protection, dispute resolution mechanisms (Investor-State Dispute Settlement or ISDS), and investment promotion
- Intellectual Property Rights (IPR): Patent protection periods, data exclusivity, enforcement mechanisms; can be contentious for India (pharmaceutical generics vs patent protection)
- Sanitary and Phytosanitary (SPS) measures: Standards for food safety and animal/plant health; key for agricultural trade
- Technical Barriers to Trade (TBT): Product standards, testing, and certification; mutual recognition arrangements reduce duplicate testing costs
Key details for India-Israel specifically: - Israel is a technology and innovation powerhouse (the "Start-Up Nation"): over 6,500 active startups; highest R&D expenditure as % of GDP globally (~5.6%) - India's main export interests: pharmaceuticals (Israel's generic drug market), diamonds (Israel is a major diamond trading hub), agricultural products, textiles - Israel's main export interests: agri-tech, water technologies, cybersecurity, medical devices, defence equipment; Israel also imports large volumes of rough diamonds from India for cutting/polishing
Connection to this news: The breadth of the negotiating agenda (goods, services, SPS, TBT, IPR, investment) signals ambition for a comprehensive deal rather than a narrow goods-only agreement. The interim agreement potentially being signed during PM Modi's visit would likely cover a subset of these areas.
India-Middle East-Europe Economic Corridor (IMEC)
IMEC was announced at the G20 New Delhi Summit in September 2023 as a multi-modal trade and infrastructure corridor linking India to Europe via the Middle East. It was framed as an alternative connectivity initiative to China's Belt and Road Initiative (BRI).
- Announced: September 9, 2023 (G20 New Delhi Summit); signed by India, US, UAE, Saudi Arabia, Jordan, Israel, EU
- Two corridors: Eastern Corridor (India-Arabian Gulf) + Northern Corridor (Arabian Gulf-Europe via Jordan-Israel)
- Infrastructure components: rail, ship-to-rail links, road transport, undersea electricity cable, hydrogen pipeline, high-speed data cable
- Israel's role: IMEC's northern corridor exits to European ports via Israeli ports (Haifa); Israeli port infrastructure is therefore critical to IMEC's viability
- Haifa Port: partially acquired by Indian company Adani Ports in 2023, underscoring India's infrastructure investment interest in Israel
- Status (2026): progress stalled due to the Israel-Hamas conflict (October 2023 onward); PM Modi's visit aims to revive momentum including IMEC discussions
- Strategic significance for India: IMEC offers an alternative to the Suez Canal route, reducing shipping time from India to Europe; also positions India as a hub in a US/West-backed connectivity framework countering BRI
Connection to this news: PM Modi's Israel visit and the FTA negotiations are strategically interlinked with IMEC — an FTA would deepen economic integration and create investment frameworks supporting IMEC infrastructure projects in Israel.
India's FTA Strategy — Selective, Export-Oriented Approach Post-2020
India has approached FTAs selectively since withdrawing from RCEP negotiations in November 2019. The India-Israel FTA is part of a broader wave of FTA negotiations resumed after 2022 (India-UAE CEPA, India-Australia ECTA, India-UK ongoing, India-GCC launched February 2026).
- India's FTA partners with active deals: Sri Lanka (1998), Thailand (early harvest 2004), Singapore CECA (2005), ASEAN FTA in Goods (2009), Korea CEPA (2009), Japan CEPA (2011), Malaysia CECA (2011), UAE CEPA (2022), Australia ECTA (2022)
- India exited RCEP: November 4, 2019; RCEP includes 15 countries (ASEAN-10 + China, Japan, Korea, Australia, New Zealand); India's main concern was Chinese goods flooding Indian market via ASEAN FTA route
- Post-2022 FTA approach: India now demands better services market access, stronger rules of origin, exclusion of sensitive agricultural goods, and sectoral carve-outs
- India-Israel FTA strategic fit: Israel is not a manufacturing competitor to India; complementary economies — India seeks tech, agri-tech, water tech; Israel seeks pharma, IT services, human capital access
Connection to this news: Israel's complementarity with India's economy (rather than competition) makes it a relatively less contentious FTA partner than, say, China or the EU — giving negotiators more room to reach agreement across multiple sectors.
Key Facts & Data
- Full diplomatic relations established: January 1992
- PM Modi's previous Israel visit: July 2017 (first Indian PM to visit Israel); elevated to Strategic Partnership
- Terms of Reference for FTA: signed November 2025
- First round of FTA negotiations: February 23–26, 2026, New Delhi
- India-Israel bilateral trade: USD 3.62–6.53 billion (excluding defence; FY 2023-24)
- Israeli defence deals with India (2026): USD 8.6 billion (making Israel India's second-largest defence supplier after France)
- Israel R&D expenditure as % of GDP: ~5.6% (highest globally)
- IMEC announced: September 9, 2023 (G20 New Delhi); corridor links India-Gulf-Europe
- Adani Ports acquired stake in Haifa Port: 2023
- PM Modi's Israel State visit: February 25–26, 2026
- India's pharma exports to Israel: pharmaceuticals are India's top export to Israel