What Happened
- India and Israel elevated their bilateral relationship to a "Special Strategic Partnership for Peace, Innovation and Prosperity" during high-level diplomatic engagement in February 2026.
- Prime Minister Narendra Modi met Israeli PM Benjamin Netanyahu; the two leaders signed 17 MoUs and agreements across energy, digital payments, trade, defence, agriculture, education, and cultural cooperation.
- Key announcements:
- FTA: First round of India-Israel Free Trade Agreement (FTA) negotiations conducted (23-26 February 2026, New Delhi); both leaders directed officials to conclude a "mutually beneficial FTA" quickly; second round of negotiations scheduled in Israel (May 2026).
- UPI in Israel: National Payments Corporation of India (NPCI) and Israel's MASAV signed an MoU to enable UPI-based cross-border remittances between India and Israel — facilitating payments for the large Indian diaspora in Israel and Indian tourists.
- Critical and Emerging Technology Partnership: A new bilateral cooperation framework in tech and innovation sectors established.
- Defence: Roadmap for joint development, joint production, and technology transfer in defence equipment — building on India's existing largest defence import relationship with Israel.
- Energy and Maritime: Cooperation in oil, gas, and maritime heritage.
- Current bilateral merchandise trade: USD 3.62 billion (FY 2024-25) — modest but with significant potential given sectoral complementarities.
- Bilateral ties: India established full diplomatic relations with Israel in January 1992; the relationship has been on a consistent upward trajectory, with PM Modi's 2017 visit being the first standalone bilateral visit by an Indian PM to Israel.
Static Topic Bridges
India-Israel Relations: Historical Evolution
India-Israel relations have undergone a fundamental transformation over the past three decades — from Cold War-era distance to a robust strategic partnership driven by technology, defence, and diaspora connectivity.
- Pre-1992: India recognised Israel in 1950 but did not establish full diplomatic relations, prioritising Arab world support and solidarity with Palestine. India abstained on the 1947 UN partition resolution for Palestine.
- 1992: Full diplomatic relations established after the Cold War ended and India launched economic liberalisation — Indian foreign policy became more pragmatic.
- 1999: Kargil War — Israel provided critical intelligence and military support, strengthening ties significantly.
- 2017: PM Modi's standalone visit to Israel — first by any Indian PM; cemented the "strategic partnership."
- 2023-26: Despite the Gaza conflict (October 2023 onwards) straining India's balancing act, bilateral state-to-state relations continued to deepen through technology, defence, and trade channels.
- India's position on Gaza: Called for restraint, humanitarian access, and a two-state solution — maintaining calibrated balance between Israel partnership and traditional Arab/Muslim world relationships.
- 2026: Elevation to "Special Strategic Partnership" — the highest tier in India's bilateral framework (previously held by the US, Russia, UK, France, Germany, Japan, and a few others).
Connection to this news: The elevation to Special Strategic Partnership reflects the maturation of India-Israel ties beyond defence — encompassing trade, technology, and people-to-people connectivity — making it one of India's most multi-dimensional bilateral relationships.
UPI as a Tool of India's Digital Diplomacy
The Unified Payments Interface (UPI) has become one of India's most powerful soft power instruments — its expansion into foreign markets represents the internationalisation of India's Digital Public Infrastructure (DPI).
- UPI: Launched in 2016 by NPCI (National Payments Corporation of India) under RBI regulation; operates on the Immediate Payment Service (IMPS) backbone.
- UPI transaction volume (FY25): Over 17,000 crore transactions (~USD 2.1 trillion in value) — world's largest real-time retail payments system.
- International UPI: Already operational (for Indian card-holders) in Singapore, UAE, France, UK, Bhutan, Nepal, Malaysia, Mauritius, Sri Lanka, Bahrain, Oman, and Japan.
- UPI in Israel: NPCI-MASAV MoU enables cross-border remittances — key for India's ~85,000-strong diaspora in Israel and growing tourist/business travel.
- G20 2023 (India Presidency): India proposed DPI as a global standard and pushed for UPI-like interoperability between national payment systems of all G20 nations.
- RuPay card: India's domestic payment card network (by NPCI) — also being expanded internationally alongside UPI.
- India's DPI exports: UPI model being adopted or studied by over 40 countries; IndiaStack (Aadhaar + UPI + DigiLocker + e-KYC) presented as a model for developing nations.
Connection to this news: UPI's expansion to Israel is part of India's deliberate "DPI diplomacy" — using digital payments infrastructure as a tool to deepen bilateral economic integration, strengthen diaspora remittance flows, and project India's technological leadership globally.
India-Israel Defence Ties and Technology Transfers
Defence cooperation is the backbone of India-Israel relations, with Israel consistently ranking among India's top two or three defence suppliers (alongside Russia and France).
- Israel is India's second-largest defence supplier (after Russia) — supplies include: Phalcon AWACS systems, Barak anti-missile systems, Heron and Harpy UAVs (drones), Spyder air defence systems, Spike anti-tank missiles, Elbit surveillance systems.
- Defence trade: Israel accounts for approximately 15-20% of India's total defence imports annually.
- Joint production: Indian companies (HAL, Bharat Dynamics, DRDO) have collaborated with Israeli firms (Elbit, Rafael, IAI) on component manufacturing and technology co-development.
- India's defence modernisation: India's defence budget for FY26 is INR 6.81 lakh crore (~USD 78 billion); government policy prioritises 'Atmanirbhar Bharat' — self-reliance in defence manufacturing.
- Israel-India cyber cooperation: Israel's Unit 8200 expertise in cyber intelligence has been shared through training and cooperation agreements.
- FTA and defence: An FTA could facilitate easier procurement of Israeli defence items by eliminating tariffs and simplifying contractual frameworks.
Connection to this news: The new "roadmap for joint development, joint production and technology transfer" in defence announced during the 2026 engagements represents a qualitative leap — moving from India as buyer to India as co-developer and co-producer of Israeli-origin defence systems.
Free Trade Agreements: India's FTA Strategy with West Asian and Middle Eastern Partners
India is rapidly expanding its FTA architecture to cover key trade partners — West Asia and the Middle East are a critical region given India's energy imports, remittances, and diaspora.
- UAE CEPA (2022): India's first trade deal in over a decade — signed in 88 days; bilateral trade target USD 100 billion; covers goods, services, investments.
- GCC-India FTA: Under negotiation with the Gulf Cooperation Council (Saudi Arabia, UAE, Qatar, Kuwait, Bahrain, Oman) — potentially India's largest FTA market for energy and diaspora.
- India-Israel FTA: Negotiations began in 2010; stalled for years; first round of current negotiations completed February 2026 — second round in Israel (May 2026).
- Israel's trade: Israel is a high-income, innovation-driven economy with strengths in technology, agricultural tech, pharma, and defence — complementary to India's manufacturing base.
- India's FTA priorities: Securing market access for pharmaceuticals, IT services, textiles, and gems/jewellery; protecting sensitive sectors (dairy, agriculture) from cheap imports.
- India-Israel bilateral trade: USD 3.62 billion (FY25) — well below potential; an FTA could unlock sectors like agricultural technology, chemicals, machinery, and defence.
Connection to this news: The first round of India-Israel FTA talks (February 2026) marks the real beginning of FTA negotiations after 14 years — driven by the political will demonstrated in the Special Strategic Partnership declaration.
Key Facts & Data
- India-Israel diplomatic relations established: January 1992.
- Previous relationship tier: "Strategic Partnership" (2017) — upgraded to "Special Strategic Partnership" (2026).
- MoUs signed (2026): 17 covering energy, digital payments, defence, agriculture, education, culture.
- Bilateral merchandise trade: USD 3.62 billion (FY 2024-25).
- FTA first round: 23-26 February 2026, New Delhi; second round: Israel, May 2026.
- UPI-MASAV MoU: NPCI + Israel's MASAV — enables cross-border UPI remittances.
- Indian diaspora in Israel: ~85,000 (includes IT professionals and workers in construction/caregiving).
- Israel's defence exports to India: Consistently ranks 2nd or 3rd largest supplier; key systems: Phalcon AWACS, Barak, Heron UAV, Spike missiles, Spyder.
- India's defence budget FY26: INR 6.81 lakh crore (~USD 78 billion).
- UPI transaction FY25: 17,000+ crore transactions worth ~USD 2.1 trillion.
- Countries with UPI: 20+ countries operational or MoU signed (Singapore, UAE, France, UK, Bhutan, Nepal, Malaysia, Israel, etc.).
- India's two-state solution position: Supports an independent State of Palestine living side by side with Israel in peace and security.
- PM Modi's 2017 Israel visit: First by any sitting Indian PM — established "Strategic Partnership."