What Happened
- Prime Minister Narendra Modi visited Israel on February 25-26, 2026 in a historic state visit — the first visit by an Indian Prime Minister since his 2017 trip — concluding with India and Israel elevating bilateral ties to a Special Strategic Partnership.
- Approximately 17 agreements and Memoranda of Understanding were signed during the visit, spanning sectors including technology, agriculture, education, labour mobility, finance, culture, and AI.
- PM Modi addressed the Israeli Knesset (parliament) and called for early finalisation of an ambitious India-Israel Free Trade Agreement (FTA), which had seen its first round of negotiations conclude in New Delhi (February 23-26, 2026).
- The next round of in-person FTA negotiations is scheduled for May 2026 in Israel, following the Terms of Reference (ToR) signed in November 2025.
- A landmark agreement was signed for the deployment of India's Unified Payments Interface (UPI) system in Israel, marking a significant step in financial and digital integration.
Static Topic Bridges
India's Free Trade Agreement Strategy
India's FTA policy has undergone a significant shift since 2021 — moving from a relatively cautious stance (India withdrew from RCEP in 2019) to proactively pursuing bilateral agreements with strategically important partners. FTAs are now embedded within the broader framework of Make in India, supply chain resilience, and geopolitical hedging.
- India signed FTAs with UAE (February 2022) and Australia (April 2022) under the banner of Early Harvest or Comprehensive Economic Partnership Agreements (CEPA).
- India signed a comprehensive FTA with the UK in May 2025 — the most significant trade deal with a G7 nation in decades.
- India-EU FTA negotiations completed their 11th round in May 2025; India-US bilateral trade negotiations are also underway.
- India signed Terms of Reference with Israel in November 2025, making Israel part of India's accelerating FTA agenda.
- The strategic logic: FTAs function increasingly as instruments of supply-chain security, diplomatic alignment, and market access — not purely economic efficiency calculations.
Connection to this news: The India-Israel FTA, whose first round concluded during Modi's visit, fits directly into this broader post-2021 FTA push. The upgrading of ties to "Special Strategic Partnership" during the visit signals that the FTA framework is embedded within a deeper strategic relationship, not purely a commercial negotiation.
India-Israel Bilateral Relations — Historical Context and Defence Axis
India and Israel established full diplomatic relations in 1992. The relationship has evolved from a quietly strategic one (India importing Israeli defence technology through much of the 1990s-2000s) to an openly publicised Special Partnership elevated further by PM Modi's 2017 visit, which marked the first time an Indian PM visited Israel.
- Israel is India's third-largest defence supplier (after Russia and France), accounting for 13% of India's military hardware imports between 2020-24.
- Bilateral merchandise trade (excluding defence) was approximately USD 6.53 billion in FY 2023-24, declining to USD 3.75 billion in FY 2024-25 due to regional security disruptions.
- Key Indian exports to Israel: pearls and precious stones, automotive products, chemicals, machinery, textiles.
- Key Israeli exports to India: high-tech machinery, medical devices, fertilisers, defence-related equipment, agricultural technology.
- India-Israel joint ventures include drones, missile systems, radar, cybersecurity technology, naval vessels, and electronic fuzes.
- The 2026 visit produced a UPI agreement (digital payments integration), an MoU on the National Maritime Heritage Complex at Lothal, Gujarat, and a Cultural Exchange Programme for 2026-2029.
Connection to this news: The 2026 state visit elevates the relationship to "Special Strategic Partnership" — a formal diplomatic tier above "Strategic Partnership" that signals intent for deeper integration across defence, technology, trade, and digital domains. The simultaneous conclusion of FTA Round 1 gives the partnership a concrete economic anchor.
UPI Internationalisation — India's Digital Diplomacy
The Unified Payments Interface (UPI) is India's real-time payment infrastructure operated by the National Payments Corporation of India (NPCI). UPI has become a tool of India's digital diplomacy, with agreements for its deployment signed across multiple countries as part of India's soft power and fintech export strategy.
- UPI processed over 16 billion transactions per month in 2025, making it the world's largest real-time payment system by volume.
- NPCI International Platforms Ltd (NIPL) is the dedicated subsidiary of NPCI responsible for UPI internationalisation.
- Countries with active UPI acceptance or interoperability agreements include Singapore, UAE, Bhutan, Nepal, France, Mauritius, Sri Lanka, and Bahrain.
- Israel becomes the latest country to enter a UPI deployment agreement — enabling Indian travellers and businesses to transact using UPI in Israel.
- UPI internationalisation supports India's goal of reducing USD dependency in bilateral payments (cross-border transactions in local currencies).
Connection to this news: The UPI-Israel agreement is one of the tangible, immediately operational outcomes of the Modi-Netanyahu summit. It integrates two high-tech economies' financial infrastructure and represents a model of Indian digital public infrastructure being adopted globally.
Key Facts & Data
- India-Israel bilateral trade (excluding defence), FY 2024-25: approximately USD 3.75 billion
- Israel: India's third-largest defence equipment supplier (2020-24), accounting for 13% of imports
- Terms of Reference for India-Israel FTA signed: November 2025
- Round 1 of FTA negotiations: February 23-26, 2026, New Delhi
- Round 2 scheduled: May 2026, Israel
- Agreements signed during 2026 visit: approximately 17 MoUs and agreements
- Bilateral partnership level upgraded to: Special Strategic Partnership
- UPI agreement signed: enables UPI deployment in Israel
- India-Israel Cultural Exchange Programme: 2026-2029 (music, theatre, visual arts)
- MoU on National Maritime Heritage Complex, Lothal, Gujarat: signed during visit
- Israel controls 13% of India's military hardware sourcing (2020-24)
- India's PM Modi's previous visit to Israel: 2017 (first-ever Indian PM visit to Israel)