India and Israel Sign Historic Bilateral Investment Agreement to Boost Trade and Strategic Ties

India and Israel have signed a major bilateral investment agreement to expand mutual trade and investment, marking a historic milestone in their relationship. The deal was signed in New Delhi by Israeli Minister of Finance Bezalel Smotrich and Indian Minister of Corporate Affairs Nirmala Sitharaman during Smotrich’s three-day official visit. This agreement aims to boost investment flows, strengthen investor protections, and advance cooperation in fields such as cybersecurity, defence, fintech, innovation, infrastructure development, and digital payment connectivity.

The pact replaces an earlier 1996 treaty and brings new investor protections, transparency, and mechanisms for resolving disputes through arbitration. It’s the first such agreement India has signed with a Western OECD country, reflecting Israel’s growing importance as a strategic and economic partner. Bilateral trade between the two countries reached $3.9 billion in 2024, while mutual investments stand at approximately $800 million, with defence and security making up the bulk of trade – India remains Israel’s largest weapons buyer.

Both governments have described the agreement as opening “new doors for investors in both countries.” It gives businesses more stability and tools for expansion, especially in fast-growing markets. The signing comes as India deepens ties with Israel under Prime Minister Narendra Modi, even as Israel faces global isolation over Gaza. In addition to trade, India continues to support a two-state solution and has abstained from UN resolutions critical of Israel but condemned acts of terror following the October 2023 attack by Hamas.

Further collaboration is planned in fintech, high-tech, infrastructure, and regulatory frameworks. The agreement also paves the way for more reciprocal business visits and has prompted Israeli construction firms to seek up to 100,000 Indian workers to replace Palestinians whose permits were revoked. Indian students now form the largest group of foreign students in Israel.

The bilateral agreement was signed at a time of shifting geopolitical alliances, with India also moving to mend ties with China and balancing its position on the US-Israel axis. Recent developments include India signing an SCO declaration condemning US-Israeli bombing of Iran, and calls from China’s President Xi Jinping for partnership with India at the Tianjin summit.

Both sides hailed the agreement for setting a new standard for investment protection and economic cooperation, promising long-term business and strategic dividends for India and Israel.