India-Israel investment treaty: A tangible outcome of strategic ties

In August 2025, Israeli Prime Minister Benjamin Netanyahu met with India’s Ambassador to Israel, J P Singh, to discuss ways to further strengthen the countries’ strategic partnership. He underscored that cooperation should be expanded, especially in the areas of security and economics, calling them “pillars of an important partnership”.

J P Singh is a highly successful IFS officer who inspired John Abraham’s Bollywood film The Diplomat. JP Singh, a 2002-batch diplomat, was appointed India’s ambassador to Israel in January this year. The posting is seen as important given the current situation in West Asia.

Against this background, it is noteworthy that on September 8, 2025, India and Israel signed a new bilateral investment treaty to boost cooperation, with a focus on technology and infrastructure. The agreement is significant because it aims to provide greater security for investors, expand trade, and strengthen strategic economic cooperation in areas like technology and fintech.

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The agreement, designed to facilitate mutual investment flows and encourage trade, was signed by Finance Minister Nirmala Sitharaman with her Israeli counterpart, Finance Minister Bezalel Smotrich, in a ceremony attended by senior officials from both governments. Smotrich said, “India is a developing economic powerhouse, and cooperation with it is a tremendous opportunity for the State of Israel.”

The deal replaces an earlier 1996 treaty that India terminated in 2017. The agreement is part of a larger effort to deepen economic and strategic ties between India and Israel. As India seeks to leverage Israel’s technology strengths and grow its own economy, the treaty provides a more stable framework for partnerships.

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The investment agreement was signed while Israel faces increasing global pressure, and some investors are pulling back due to the ongoing conflict in Gaza. The pact signals that the India-Israel partnership is strong, even amid regional uncertainty in West Asia and India-US tensions.

Bilateral investment stood at around $800 million, a modest figure compared to the annual trade of roughly $4 billion in 2024. The new pact, combined with a potential future Free Trade Agreement (FTA), could significantly increase investment and trade flows. The treaty aims to provide greater certainty and protection for investors through arbitration, fair treatment, and safeguards against expropriation.

The deal also follows other recent agreements, like India’s investment pacts with the UAE and Kyrgyzstan in 2024 and 2025. Signing the treaty with a high-tech hub is an attempt by India to advance its strategic interests through bilateral cooperation.

The new bilateral investment pact focuses on several high-tech and strategic sectors:

• Fintech: The agreement aims to drive financial innovation and build more secure and scalable fintech ecosystems in both nations.

• Cybersecurity and Defence: These sectors are a key priority, building on the long-standing strategic partnership between the two countries.

• Innovation and Technology: Collaboration is expected in various high-tech fields, including AI, drones, and medical devices.

• Infrastructure: Indian investment in Israeli infrastructure includes Adani’s acquisition of the Haifa Port in 2022. Rail and metro systems are also seen as potential areas for investment.

Several other sectors present significant investment potential for India and Israel. The foremost among these is agriculture. Israel’s expertise in precision agriculture, crop diversity, and water-use efficiency can help India boost productivity and modernise its large agricultural sector.

The Indo-Israel Agricultural Project (IIAP) includes Centres of Excellence (CoE) that demonstrate Israeli agricultural technology tailored for local Indian conditions. In May 2023, India and Israel signed an agreement to establish an Innovation Centre for Agriculture to further promote collaboration. Cooperation is also expanding into animal husbandry and dairy development.

Water management, especially wastewater recycling and desalination is a critical sector. With its rich experience in combating water scarcity, Israel can offer solutions for India’s water management challenges. Israeli companies have already invested in desalination plants and atmospheric water generation in India. The Indian Institute of Technology (IIT) Madras and Israel are collaborating on a Centre of Water Technology to develop sustainable solutions for India’s water needs. Israel’s success with efficiency, reuse, and water pricing models offers valuable lessons for India.

Another sector is renewable energy. The I2U2 group—comprising India, Israel, the UAE, and the US—is advancing a major hybrid renewable energy project in India’s Gujarat state. Israeli companies are increasingly investing in India’s renewable energy sector. Equally important is the area of alternative energy. Indian companies like Indian Oil Corporation are investing in Israeli firms such as Phinergy, which manufactures aluminium-air battery systems for green mobility.

There are also heightened prospects for cooperation in space technology, including satellite manufacturing: In 2024, India liberalised its foreign direct investment (FDI) policy in the space sector, opening it to foreign investment. This creates opportunities for joint ventures and investments in satellite manufacturing, launch vehicles, and services. Israel Aerospace Industries (IAI) launched its NeuSPHERE Innovation Acceleration Program in 2024 to fund and mentor Indian startups in aerospace, reflecting the growing potential for collaboration.

Medical technology is another important sector. Israeli companies have invested in India’s healthcare sector, while India’s large pharmaceutical industry and growing healthcare market offer new collaboration avenues. The two countries have engaged in joint research programmes in areas like advanced medical equipment and technology.

The automotive and mobility sector is also very promising. Speaking at the Automotive Component Manufacturers Association (ACMA) on September 9, 2025, Reuven Azar, Israeli Ambassador to India, shared his vision for deepening India–Israel collaboration across automotive technology and infrastructure. He said that Israel’s 800-plus mobility startups can power India’s auto industry. Investment is possible through partnerships with Indian automotive companies.

Summing up, the India-Israel Bilateral Investment Treaty is significant because it is expected to boost investment and trade. The deal reinforces the close strategic relationship, including defence cooperation, that the two nations have cultivated. The treaty carries significance beyond its explicit provisions by demonstrating a deepening economic and diplomatic partnership between the two countries.

The pact helps India diversify its foreign investor base and expand exports, especially amid global economic uncertainty and trade tensions with other countries. For Israel, the agreement is a crucial step to strengthen ties with a major economic power and attract investment. The agreement shows that India and Israel have cultivated a shared vision for mutual prosperity, fostering important collaboration at the bilateral level.

The writer is a retired Indian diplomat and had previously served as Ambassador in Kuwait and Morocco and as Consul General in New York. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.