India-Israel FTA: Second Round Talks Wrap Up After Modi’s February Israel Visit

First, a Quick Primer: What Is an FTA and How Is It Different from the BIA?

India and Israel just brought a Bilateral Investment Agreement into force on July 4, 2026, a pact that protects the rights of investors from each country when operating in the other's economy. That's important, but it's a narrower instrument. A Free Trade Agreement is a bigger and more ambitious undertaking. It's a comprehensive legal framework that governs the full range of economic exchange between two countries, how goods are taxed at the border, how service providers are treated, how intellectual property is protected, what food safety standards apply to agricultural trade, how customs processes work, and much more. Where a BIA tells investors "your investment is safe here," an FTA tells businesses "here are the rules of the road for everything." When both are in place, as India and Israel are now building toward, they form a comprehensive economic partnership that can fundamentally reshape how much trade and investment flows between two countries.

How Did We Get Here? The Paper Trail

The India-Israel FTA story has a clear paper trail. The Terms of Reference for the FTA were signed in November 2025, establishing a structured framework for discussions on identified areas to enhance trade and economic cooperation. Think of the Terms of Reference as the rulebook for the negotiation itself, it defines what topics are on the table, what the scope of the agreement will be, and what kind of deal both sides are aiming for. Getting that document signed is a prerequisite for formal negotiations to begin, and it happened quietly at the end of 2025. Then came a significant diplomatic moment that added rocket fuel to the process. Prime Minister Narendra Modi embarked on a two-day state visit to Israel in late February 2026, his second visit to the country. The first round of FTA negotiations had, somewhat unusually, been timed to coincide with the visit, it began the day before Modi departed for Tel Aviv, with Commerce Secretary Rajesh Agrawal explicitly noting the significance of the timing. Following delegation-level talks between Modi and his Israeli counterpart Benjamin Netanyahu, the two countries elevated their ties to a Special Strategic Partnership and signed a wide-ranging set of agreements to boost cooperation in trade, agriculture, energy, cyberspace, and digital payments. The Modi visit was historic in more ways than one. Modi became the first Indian Prime Minister to address the Israeli Parliament, the Knesset, and was conferred the Speaker of the Knesset Medal, the highest honour of the Israeli Parliament, making him the first foreign leader to receive it.

During that address, he was direct about where he wanted the economic relationship to go. Prime Minister Modi called for the early finalisation of an ambitious Free Trade Agreement to realise the untapped trade potential between the two countries. When a sitting Prime Minister says that in a foreign parliament, the bureaucratic machinery on both sides takes it as a mandate. The first round of FTA negotiations concluded successfully on February 26, 2026, covering trade in goods and services, rules of origin, technical barriers to trade, customs procedures, intellectual property rights, digital trade, and other key chapters. Both sides agreed to continue intersessional engagements virtually, with the next round of in-person talks scheduled for May 2026 in Israel.

Round Two: What Actually Happened in New Delhi

The second round of negotiations was held from July 20 to 23, 2026, in New Delhi, with technical experts from both sides holding dedicated sessions covering trade in goods, trade in services, rules of origin, sanitary and phytosanitary measures, technical barriers to trade, intellectual property rights, customs procedures and trade facilitation, economic cooperation, and other chapters. The discussions were described as constructive and forward-looking, with both sides engaging in detailed technical deliberations aimed at narrowing gaps and identifying areas of convergence. The language "narrowing gaps" is the most important phrase there. It signals that the two sides have now moved past the stage of simply agreeing on what to discuss, and are actually working through the substantive disagreements that will determine the shape of the final deal. At the opening session, India's Chief Negotiator and Additional Secretary in the Department of Commerce, Ajay Bhadoo, reaffirmed India's commitment to negotiating a balanced, comprehensive, and mutually beneficial agreement. Israel's Chief Negotiator, Yifat Alon Perel, Senior Director of Trade Policy and Agreements and Deputy Trade Commissioner in Israel's Ministry of Economy and Industry, appreciated the progress made since the first round and emphasised the importance of maintaining momentum toward an ambitious and mutually beneficial outcome.

Decoding the Chapters: What Are They Actually Negotiating?

A modern FTA is not just a tariff schedule. It is a multi-chapter legal document that can run into hundreds of pages. Here's what each of the negotiating areas actually means in plain terms. Trade in Goods is what most people think of when they hear "trade deal", which products get tariff reductions or eliminations, how quickly, and with what exceptions. This chapter will determine whether Israeli medical devices become cheaper in India, whether Indian textiles and pharmaceuticals get better access to the Israeli market, and which sectors remain protected on both sides. Trade in Services is arguably more important for a modern, tech-forward bilateral relationship like this one. Services, IT, consulting, finance, healthcare, education, tourism, make up a massive and growing share of both economies. This chapter governs how professionals and service providers are treated when they operate in each other's markets. Indian IT and business services companies have an obvious interest here. Rules of Origin sounds technical but is critically important. It determines what makes a product "Indian" or "Israeli" for the purposes of claiming preferential tariff treatment under the FTA. Without tight rules here, a company from a third country could simply route products through India or Israel to take advantage of the deal, a practice called "trade deflection." Both sides have strong interests in preventing this, but agreeing on the specific thresholds is always contentious.

• Sanitary and Phytosanitary Measures (SPS) govern food safety and agricultural product standards. If India and Israel want to meaningfully trade in agricultural goods, and given Israel's agri-tech prowess and India's large farm sector, there's potential here, both sides need to recognise each other's food safety and inspection standards to some degree. This chapter is almost always politically sensitive because it touches on domestic regulatory sovereignty.
• Technical Barriers to Trade (TBT) is the equivalent of SPS but for manufactured goods. Different countries have different standards for products, safety certifications, labelling requirements, testing protocols. If India requires a certain certification that Israeli products don't have (and vice versa), that becomes a non-tariff barrier to trade even if there are zero tariffs. This chapter tries to reduce those frictions through mutual recognition of standards.
• Intellectual Property Rights (IPR) is one of the more contentious areas in any FTA India negotiates. Israel has a highly innovative economy with strong interest in protecting patents, trademarks, and trade secrets. India has historically been cautious about IP commitments that could restrict its pharmaceutical generics industry, the argument being that Indian generics save lives not just domestically but across the developing world. Striking a balance here will be one of the harder parts of this negotiation.
• Customs Procedures and Trade Facilitation is about reducing the administrative friction at the border, faster clearances, digital documentation, transparent fee structures. For businesses actually shipping goods between the two countries, this is often where the rubber meets the road.

The Numbers Behind the Deal

Merchandise trade between India and Israel was valued at USD 3.93 billion in FY 2025–26. For context, the figure was approximately USD 3.62 billion in FY 2024–25, so there's an upward trend, but it's still relatively modest for two economies of this size and the depth of their relationship. India's total merchandise exports are in the range of USD 430–450 billion annually. Its trade with Israel at under USD 4 billion represents less than 1% of that, a number that seriously underperforms what the complementarities between the two economies would suggest is possible. What does Israel actually sell to India? Primarily high-value manufactured goods, defence equipment, diamonds (Israel is a major global diamond cutting and polishing hub), chemicals, machinery, electronic components, and agricultural inputs. What does India sell to Israel? Diamonds again (rough diamonds are a big two-way flow), pharmaceuticals, chemicals, engineering goods, and textiles. Both governments believe an FTA could meaningfully shift these numbers upward, particularly by opening the door to more services trade and investment-linked commerce that doesn't show up cleanly in merchandise statistics.

The Modi Visit and What It Changed

The February 2026 state visit deserves its own section because it genuinely changed the energy around this negotiation. Modi's first visit to Israel was in 2017, a landmark moment at the time, as no sitting Indian Prime Minister had ever visited Israel. The 2026 visit was his second, and it was notably more substantive. Modi and Netanyahu launched an India-Israel partnership on critical and emerging technologies, accelerating collaboration in artificial intelligence, quantum technologies, and critical minerals. An agreement was also reached for the use of UPI, India's Unified Payments Interface, in Israel, which is a concrete marker of how seriously both sides are taking economic integration. UPI is now accepted in a growing number of countries, and its inclusion in the India-Israel framework signals an intention to make everyday economic exchange easier, not just top-line trade. The elevation of ties to a "Special Strategic Partnership", a step up from the existing "Strategic Partnership", matters because it creates a new institutional architecture for the relationship. It signals that both governments see this as a long-term, high-priority relationship, not a transactional one. That political backing cascades down into the bureaucratic and technical negotiations; negotiators on both sides know their leadership is watching.

Why This Particular FTA Is Complicated

Every FTA has its complications, but the India-Israel one has some distinctive challenges worth understanding. India is currently negotiating or renegotiating multiple FTAs simultaneously, with the UK, the EU, and others, each with its own political economy. The political bandwidth for trade liberalisation is always limited, and India's experience with some past FTAs (particularly the ASEAN goods agreement, which many Indian manufacturers feel gave away more than it received) has made the government cautious about giving too much away. Israel's economy, while advanced, is small. Its leverage in a goods tariff negotiation with a country the size of India is limited. Where Israel has real negotiating power is in technology, defence, and knowledge-intensive services, areas where what it offers is genuinely scarce and highly valued. The FTA negotiations will likely need to reflect this asymmetry in creative ways. There's also the geopolitical backdrop. India has traditionally maintained friendly relations with both Israel and the Arab world, and has been careful to keep that balance. An FTA with Israel, particularly one that includes defence and technology chapters, involves some navigation of that broader regional context.

What "Second Round" Actually Means for the Timeline

Two rounds of negotiations might sound like significant progress, but in the world of FTA negotiations, it's early days. The India-UK FTA, for reference, went through well over a dozen rounds across several years before being concluded in 2025. The India-EU negotiations have been going on intermittently for over a decade. The fact that both rounds happened relatively quickly, February and July, and that both sides are describing progress in concrete terms (narrowing gaps, areas of convergence) is encouraging. As recently as June 26, Israel's Head of Economic and Commercial Mission at the Embassy of Israel said the agreement could be signed in the near future as both countries seek to deepen economic cooperation. That's the kind of optimistic signal that wouldn't be put out publicly unless both sides genuinely believe the deal is achievable in a reasonable timeframe. Both countries have reaffirmed their commitment to expediting negotiations and working towards the early conclusion of the India-Israel FTA, which is expected to open new opportunities for businesses, increase market access, encourage investment, and strengthen the strategic economic partnership between the two nations.

The Bigger Picture

Let's step back and look at what's happening across the India-Israel economic relationship simultaneously, and we see a pattern that goes beyond any single agreement. The BIA entered into force in July 2026. The FTA is under active negotiation. The Modi visit elevated ties to Special Strategic Partnership level and produced agreements on UPI, critical technologies, quantum computing, and critical minerals. Defence cooperation continues to deepen. Agricultural and water technology linkages are expanding. What's being constructed, piece by piece, agreement by agreement, is a comprehensive economic architecture between two countries that have always had warm political ties but whose economic relationship has historically underperformed its potential. The India-Israel FTA, when it eventually comes, and the current momentum suggests it's a matter of when, not if, will be the capstone of that architecture. It will give businesses, investors, and professionals from both countries a clear, predictable, and legally robust framework for engaging with each other's economies. The negotiators sitting across the table at Vanijya Bhawan last week are doing the painstaking technical work that makes that possible. Round two is done. More will follow.