India-Israel FTA talks: Strategic sectors must take centre stage over merchandise trade, says GTRI

India and Israel have revived negotiations for a long-pending Free Trade Agreement (FTA), nearly a decade after the last formal talks stalled, with experts saying the emphasis should be on strategic collaboration rather than merchandise trade.

The Global Trade Research Initiative (GTRI) on Monday said that India–Israel trade remains modest, and the renewed push should focus on areas such as defence manufacturing, electronics, semiconductors, water and irrigation technology, precision agriculture, cybersecurity, and frontier R&D.

“For both countries, therefore, the value of the renewed FTA effort lies less in merchandise trade and more in strategic cooperation -- in defence manufacturing, electronics, semiconductors, water and irrigation technology, precision agriculture, cybersecurity, and frontier R&D,” GTRI Founder Ajay Srivastava said.


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A long road back

India and Israel first opened FTA talks in 2010 and held several rounds of discussions through 2012–13. However, the negotiations stalled after 2014 amid disagreements over tariffs, standards, and access for sensitive products.

Following a series of high-level exchanges in 2024–25, the two governments have now finalised new Terms of Reference to relaunch negotiations. Last week, they formally inked these terms, signaling the restart of talks.

Commerce Minister Piyush Goyal, after his visit to Israel from November 20–22, indicated that the FTA discussions may follow a two-phase approach: an initial package focused on tariff reductions for goods, followed by a broader agreement covering investment, technology transfer, defence, space, agri-tech, cybersecurity, AI, fintech, R&D, innovation, and drip-irrigation systems.

Trade remains concentrated

Bilateral merchandise trade between India and Israel remains relatively small at $3.6 billion in FY2025.

India’s exports to Israel totaled $2.1 billion, dominated by cut and polished diamonds ($555 million), rice ($102 million), organic chemicals ($96 million), ceramic tiles ($81 million), and aircraft parts ($54 million).

Imports from Israel reached $1.5 billion, led by diamonds ($333 million), electronics ($350 million) -- including integrated circuits ($117 million) and electronic components ($66 million) -- as well as fertilisers ($135 million), insecticides ($63 million), and machinery ($91 million).

Trade Direction	Category	Value (USD million)
India → Israel (Exports)	Cut & Polished Diamonds	555
	Rice	102
	Organic Chemicals	96
	Ceramic Tiles	81
	Aircraft Parts	54
Total Exports		2,100
Israel → India (Imports)	Diamonds	333
	Electronics	350
	— Integrated Circuits	117
	— Electronic Components	66
	Fertilizers	135
	Insecticides	63
	Machinery	91
Total Imports		1,500
Bilateral Trade		3,600

GTRI noted that even with an FTA, Indian exports may struggle to expand significantly. Israel, a high-income, technology-driven market of under 10 million people, has limited demand for Indian mass-market products such as textiles, automobiles, and general engineering goods.

In sectors where India is competitive -- agriculture, generics, steel, chemicals -- Israel is either self-sufficient, tightly regulated through quality and phytosanitary norms, or already extends tariff preferences to partners such as the EU and the US.

This keeps Indian products at a structural disadvantage.

“As a result, commerce remains concentrated in a few niche categories such as diamonds, rice, and ceramic tiles,” the GTRI brief said.

Strategic gains ahead

The think tank stressed that the real value of the FTA lies in strategic collaboration. Beyond goods trade, the two countries are expected to deepen cooperation in defence manufacturing, electronics, semiconductors, water and irrigation technologies, precision agriculture, cybersecurity, and frontier R&D -- sectors where both nations have complementary strengths.

With the renewed push, India–Israel economic ties are entering a phase where the focus is likely to shift from modest merchandise trade to broader strategic and technological collaboration, setting the stage for a more future-oriented partnership.