Since the establishment of full diplomatic relations in January 1992, the India-Israel bilateral relationship has been predominantly viewed through the prism of defence cooperation, particularly the arms trade. As a result, economic cooperation began on a humble note, with an estimated bilateral trade figure touching approximately US$200 million in 1992. For nearly two decades following the normalisation of relations, financial and commercial cooperation between the two countries remained modest, despite sustained efforts by successive governments, irrespective of their political orientations.

Nevertheless, engagements in economic and investment received significant impetus from mid-2014 onwards, especially following the Bharatiya Janata Party's (BJP) electoral victory in that year's general elections in India. The party's subsequent electoral successes in 2019 and 2024, under Prime Minister Narendra Modi's leadership, further facilitated the expansion of bilateral economic relations, alongside other domains. In 2014, the Modi government introduced the Link West policy to enhance India's regional outreach vis-à-vis the Middle East. Within the broader framework of its extended neighbourhood policy, which accords prominence to Middle Eastern countries including Israel, New Delhi has been transforming and expanding bilateral ties across multiple sectors, particularly trade, investment, food security, climate change, military-security and defence, technology, tourism, culture, and entertainment.

A major breakthrough occurred following Modi's visit to Israel in July 2017 (during which the relationship was upgraded to Strategic Partnership), marking the first visit by an Indian head of government. The reciprocal visit to India by his Israeli counterpart, Benjamin Netanyahu, in January 2018, strengthened the bilateral relations and both sides prioritised economic cooperation. It should be mentioned that the Middle East, with its substantial natural resource endowments, has played an instrumental role in India's economic development and energy security. While India's trade and commercial cooperation has primarily focussed on Arab Gulf states for the past decades, New Delhi has been making sustained efforts to strengthen similar partnerships with Israel, another economically and technologically advanced country in the Middle East.

The emphasis given on economic cooperation could be considered as an important decision taken by both governments to establish collaboration in less sensitive areas by expanding beyond defence cooperation. This development has come at this juncture when India is in a quest for partners to diversify its economic and investment-related cooperation, while it has also become one of Israel’s prime foreign policy objectives to expand ties in similar domains with one of the world’s fastest-growing economies. A similar pattern could be witnessed in India’s ever-growing ties with the member states of the Gulf Cooperation Council, which view the former as an emerging lucrative destination for investment. India's expanding markets, therefore, have generated investment opportunities for Israeli companies, particularly in the technology areas. The moves made by the Indian government to broaden its partnerships complement with its Israeli counterpart’s unrelenting efforts to establish a presence in foreign markets for exports and investments. As an acknowledgement of the existing mutual opportunities, Ron Malka, then Israeli Ambassador to India, observed in 2020 that "The Indian and Israeli markets do not compete with one another but complement one another."

In the fiscal year 2024, the Indo-Israeli bilateral trade stood at US$6.53 billion (excluding defence), with a decline from US$10.77 billion which was recorded for the 2022-2023 period. This reduction in trade volume was due to the disruption in trading activities between the two countries in the wake of the tense security development in the Middle East. It is, however, noteworthy that India remains Israel's second-largest trading partner in Asia. The importance these two countries accord to promoting economic partnership has been evidenced by high-level ministerial visits (including Foreign and Finance/Economy Ministers) in recent years, in addition to the aforementioned prime ministerial exchanges. For instance, in February 2025, Nir M. Barkat, Israeli Minister of Economy and Industry, visited India with the "largest-ever Israeli business delegation," signalling a new phase in bilateral cooperation. The meetings held during the India-Israel Business Forum and India-Israel CEO Forum provided both sides with opportunities to explore "new avenues of economic cooperation, technological collaboration, and investment opportunities," including agri-tech, renewable energy, and advanced manufacturing. Previously, the minister had visited India in early December 2024, where he engaged with Indian officials regarding startup collaboration, particularly in space and quantum technologies, while also exploring additional collaborative innovation initiatives in agriculture and health domains. Israel has also recognised the opportunities the Indian markets could offer for Israeli innovations and, therefore, has necessitated it to strengthen economic ties with India. The visiting Israeli minister, as a result, emphasised the complementary nature of both economies and how Israel's technological expertise aligns with India's market scale.

Developments over the last few years indicate that both Indian and Israeli governments are committed to enhancing mutual investments. Having said that Indian firms—both private and state-owned—are already expanding their presence in Israel through mergers and acquisitions, with several companies, including TCS, Sun Pharma, State Bank of India, Reliance Industries, and L&T Technology Services, having already established significant footholds within Israel's innovation ecosystem. For instance, the tender won by India’s Adani Ports and Special Economic Zone Limited (APSEZ) in Israel in July 2022 to privatise Haifa port, Israel’s second largest ports, marked a significant entry of Indian private firms in the logistics sector. Stepping up its presence, the Adani Group has reportedly planned to invest nearly US$ 10 billion with Tower Semiconductor, an Israeli partner, to set up a chip manufacturing plant in Maharashtra (in India). These initiatives will likely facilitate the development of robust local supply chains while strengthening technical innovation and research and development capabilities. Further, they could also benefit micro, small, and medium enterprise stakeholders while providing workforce training and skill development opportunities, thereby improving employability and competency standards for emerging technologies.

Similarly, Israeli investments in India have shown consistent growth, with over 300 investments across sectors spanning high-tech domains, agriculture and water management. This in addition to the Israeli presence in other critical fields, such as defence, aerospace, health, renewable energy and so on. Moreover, with India ranking 63rd in the World Bank's Doing Business Report in 2019, which was a notable improvement from that of 142nd rank in 2014, a conducive environment likely persists for advancing economic and investment partnerships between India and Israel. To increase investment cooperation between the two countries, the current ambassador of Israel to India, Reuven Azar, called for an early signing of a bilateral investment agreement without further delays.

Transcending conventional bilateral cooperation, India and Israel are pursuing collaborative opportunities within multilateral or mini-lateral frameworks involving like-minded regional stakeholders (sharing similar interests). It is, therefore, significant that both are signatories to the quadrilateral group, I2U2 (comprising India, Israel, the UAE and the US), a collaborative framework with the broader objective of regional integration in the Middle East through economic activities and technological partnerships.

The economic opportunities within I2U2 hold significant appeal for India's post-pandemic recovery approach, since the partnership's concentration on infrastructure development, digital innovation, and sustainable development matches India's domestic agenda. India shows strong interest in this alliance because of opportunities for collaboration in renewable energy, water conservation, and agricultural technology, which offer solutions to pressing development issues. The I2U2 structure gains further appeal from its focus on private sector involvement and innovation-based growth, which fits with India's economic liberalization goals and its ambitions to become a major global manufacturing center. This grouping also provides India with opportunities to forge economic partnerships with a technologically giant – Israel, and an economic heft – the UAE, from the same region. Although the Gaza conflict that started in October 2023 may decelerate the momentum of the I2U2 initiative, the commitment of the signatory nations remains steadfast. Israeli leadership continues to acknowledge the significance of this initiative, and it remains a matter of time before Israel enhances its cooperation with the partners.

Similarly, Israeli officials have signalled their keenness to collaborate with India within the framework of the India-Middle East-Europe-Economic Corridor (IMEC), a multinational initiative launched in September 2023 in New Delhi. The geo-strategic location of Israel, which is at the crossroads of two important continents – Asia and Europe – makes it an important stakeholder in this regional initiative, which has been conceptualised and designed to intensify economic, energy and transportation cooperation. A successful integration of Israel into IMEC, in the near future, would enable it to upgrade its existing infrastructures, including transportation as well as logistics as well as emerge as a major transit hub that connects both the continents. Such integration carries the potential to increase Israel’s trade volume with India, its Gulf partners and also the European countries. Scholars are of the view that the corridor is anticipated to diminish Israel’s “dependence on traditional trading partners,” while investing in its railway infrastructure and seaports (such as Haifa and Ashdod) could position the country as a vital trade hub. Regardless of the tensions which are ongoing in the Middle East, the IMEC signatories have continued to show their interest and commitment to advance the corridor’s development as they are cognisant of the economic benefits it could provide. Israel, therefore, is also fully aware of IMEC’s significance, and its participation could lead to increased economic ties with the regional stakeholders as well as India.

Notwithstanding the growing economic partnerships between India and Israel, a few challenges exist, which would require a tactful politico-diplomatic navigation. One of the pertinent obstacles is the regional geopolitical tensions, which have escalated following the October 2023 attack by Hamas against Israel. In the long run, such geopolitical developments could complicate India’s efforts in balancing its strategic partnership with Israel against its relationships with Arab nations and Iran, which are equally important from New Delhi’s economic and energy security perspectives as well as connectivity projects like the Shahid Beheshti Port Terminal project in Chabahar. If the tensions do not deescalate, chances are that progress on connectivity initiatives like I2U2 and IMEC, which India and Israel consider crucial for their economic partnership, could be stymied. Further, China’s deep-rooted economic and technological ties with Israel, despites Beijing’s political stance on the unresolved Israeli-Palestinian issues, could emerge as a third-party competitive factor for India’s economic engagement with this Middle Eastern country. China positions itself as one of Israel’s largest trading partners globally, with significant influence in investment markets and Israeli technology, particularly in AI, cybersecurity and healthcare.

While there are significant prospects for bilateral trade to grow, it is equally important that India and Israel clear the existing bottlenecks and ink the Free Trade Agreement. This has been pending since mid-2010. Such a breakthrough would boost trade ties and strategic partnerships, not only in the economic field but also across sectors, including technology, defence and innovation. These are a few sectors which India and Israel consider critical for their economies. Moreover, given the strong political commitment of both governments' leadership, economic cooperation between India and Israel is expected to flourish in the days ahead. The emerging developments have demonstrated the salience of the Indo-Israeli relations, particularly within India’s politico-diplomatic steps to strengthen its economic partnerships across its extended neighbourhood – Middle East.

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