India and Israel are considering implementing their proposed Free Trade Agreement (FTA) in two phases to ensure that the trade communities of both countries can benefit early on. Commerce and Industry Minister Piyush Goyal announced this strategy on Sunday, while in Israel to meet with leaders and businesses to explore methods to increase bilateral trade and investments. He is also leading a 60-member business delegation during this trip.
The Terms of Reference (ToR) to formally start negotiations for the agreement were signed by India and Israel on Thursday. The ToR includes measures such as removing tariff and non-tariff barriers to provide market access for goods, facilitating investment, simplifying customs procedures, increasing innovation and technology transfer cooperation, and easing regulations to promote trade in services.
According to Goyal, both he and Israeli Economy and Industry Minister Nir Barkat have agreed to initially focus on the "low-hanging fruit" within the FTA. They have also decided not to address sensitive topics on either side. The two countries may also investigate "how innovation and R&D can drive greater investments in each other's countries, work on joint projects where we can leverage on their skill sets, and they can leverage on the economies of scale in a large market like India," according to Goyal.
The phased strategy is intended to accelerate trade and investment growth between India and Israel. The first phase of the FTA may be released to "kickstart the benefits faster," according to Goyal.
In Tel Aviv on November 20, 2025, Goyal and Barkat signed the Terms of Reference (ToR) to begin negotiations for a comprehensive Free Trade Agreement. The FTA is anticipated to significantly increase the current trade volume and open up industries including agriculture, pharmaceuticals, electronics, defense, and digital services. The agreement represents a major turning point in the development of trade, innovation, and strategic collaboration between the two countries.
The FTA is anticipated to promote the flow of capital, joint ventures, and cross-border innovation hubs between Indian and Israeli enterprises. India's vast consumer market and manufacturing ecosystem are well complemented by Israel's proficiency in agritech, water management, cybersecurity, and R&D.
Barkat noted that a free trade agreement would create considerable business opportunities for industries in both countries and promote bilateral trade and investment flows. He also mentioned that both countries have chosen not to include any sensitive areas in the FTA negotiations. Numerous Israeli firms, according to Barkat, are interested in establishing subsidiaries in India, which would serve as their entry point into Asia.
Goyal stated that Israel has recently released pre-qualification documents for a USD 50 billion metro project in Tel Aviv. It is one of the largest projects, involving 300 kilometers of underground tunneling, and they want Indian firms to bid on it.
India is Israel's second-largest trading partner in Asia. While diamonds, petroleum products, and chemicals have historically dominated bilateral merchandise trade, there has been an increase in trade in fields like electronic machinery, high-tech products, communication systems, and medical equipment in recent years.
India's exports to Israel decreased by 52% to USD 2.14 billion in 2024-25 from USD 4.52 billion in 2023-24. Imports also decreased by 26.2% to USD 1.48 billion in the most recent fiscal year. The total value of bilateral trade was USD 3.62 billion.
