But for Israel, the proposed pact is about much more than lowering tariffs—it is increasingly being viewed as a framework for investment, innovation, co-production and deeper participation by companies from both countries in each other’s economies.
I recently met Reuven Azar, Ambassador of Israel to India, at the Embassy of Israel in New Delhi for a conversation on the progress of the FTA negotiations and the broader trajectory of India-Israel relations. The discussion ranged from trade and investment to infrastructure, defence technology, agriculture and the rapidly changing strategic environment in West Asia.
Azar indicated that the two governments are keen to move quickly on the trade negotiations. Two rounds have already been held—the first in February and the second in July—with another round planned for October. “We want to do it as soon as possible,” Azar said. “We are planning a third round in October, and we hope that by the fourth round, in February, we will finalise.”
Beyond tariffs and market access
The negotiations cover conventional FTA issues such as customs duties, rules of origin and market access, but Azar believes some of the more consequential discussions concern investment and economic cooperation.
The challenge arises partly from the different sizes and structures of the two economies. Israel is a relatively small and open economy, while India represents a vast consumer and industrial market. New Delhi is therefore looking beyond conventional trade concessions towards investment and other long-term economic benefits.
Governments, however, cannot simply commit private companies to making investments. The solution, according to Azar, lies in creating mechanisms that make such investments commercially attractive. “We can create avenues for that,” he said, pointing particularly to innovation and technology partnerships.
India and Israel already have substantial cooperation in defence innovation, while Indian technology companies also work with Israeli businesses on product development and intellectual property. Azar expects these relationships to deepen as the institutional architecture supporting bilateral investment becomes stronger.
“The relationship has to be mutually beneficial, not just in terms of trade, but also in terms of investment and innovation,” he said.
The Ambassador also pointed to a growing reverse flow: Indian companies investing in Israeli start-ups to gain access to technologies that could strengthen their competitiveness in international markets.
Trade numbers don't tell the entire story
Headline bilateral trade figures, Azar argued, do not adequately capture the economic relationship. Some India-Israel trade is now routed through the UAE, particularly following the Abraham Accords, making conventional bilateral trade statistics less representative of the actual commercial engagement.
More important, he said, is the increasing emphasis on co-production, technology transfer, localisation and adaptation of Israeli solutions for Indian conditions. Water technology provides a useful example. Israeli technologies can be expensive for large-scale deployment in India, but partnerships with Indian companies can create local supply and production chains that reduce costs.
“The potential is not necessarily only in the numbers of trade,” Azar said, stressing the importance of co-production, innovation, technology sharing and localisation.
$50-billion Tel Aviv Metro opens doors for Indian companies
Infrastructure could emerge as another major pillar of the relationship. Israel has been actively encouraging Indian infrastructure companies to participate in its large projects. The most prominent example is the Greater Tel Aviv Metro, an estimated $50-billion undertaking.
According to Azar, 22 companies, including Israeli firms, applied for prequalification for a set of infrastructure tenders associated with the project. Of these, 11 are Indian. The scale of the opportunity is substantial. Azar said there are around 10 Infra-1 tenders, each valued at approximately $800 million.
“This will create a revolution in the relationship,” he said, arguing that infrastructure could significantly expand the presence of Indian companies and workers in Israel. An important attraction for participating companies is that the projects would be backed by Israeli government financing rather than requiring companies to finance the entire investment themselves.
Defence cooperation and the race against new threats
Our conversation also turned to defence technology, an area in which India and Israel have built a long-standing partnership. Modern warfare is evolving rapidly, particularly with the proliferation of drones, missiles and increasingly sophisticated weapons. For Azar, this makes speed in technological development and cooperation critical.
“Necessity is the mother of creativity,” he said, noting that Israel's security environment has forced the country to continuously develop new technological responses. India and Israel, he argued, face some common challenges and therefore need to accelerate cooperation, production and technological development.
“The enemy is always developing new threats. So we have to be very, very alert, and our cooperation has to be much faster,” he said.
Agriculture remains a technology laboratory
Agriculture, one of the oldest pillars of India-Israel cooperation, is also entering a new technological phase. Azar highlighted the introduction of new technologies through the Centres of Excellence, including N-Drip, a gravity-based irrigation system designed to improve water efficiency without requiring conventional external power.
Israel is also introducing technology aimed at extending the storage life of agricultural produce without electricity—an area with potentially significant implications for small farmers and efforts to reduce post-harvest losses in India.
Azar does not expect the FTA by itself to transform agricultural cooperation, given the extensive partnership that already exists. Instead, its importance could lie in creating better conditions for Israeli agri-tech companies to manufacture, invest and deploy solutions in India. “The FTA can be a catalyst mainly for the private sector,” he said.
The emerging contours of the agreement therefore extend well beyond a conventional tariff-cutting exercise. If negotiations progress as envisaged, the India-Israel FTA could become an enabling framework for a much broader economic partnership—linking Indian scale and manufacturing capabilities with Israeli technology and innovation, while opening new opportunities for Indian companies in Israel's infrastructure and technology-driven economy.
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