India-Israel BIA: 3 tenets to boost trade and investment

Marking a historic milestone in the relationship of the two countries, India and Israel signed the Bilateral Investment Agreement (BIA) in New Delhi today. The pact is expected to boost trade and mutual investments, safeguard investments against expropriation, ensure transparency, and enable smooth transfers and compensation for losses.

On signing the agreement, the leaders of both countries vowed to work together in fintech innovation, infrastructure development, financial regulation, and digital payment connectivity. While Finance Minister Nirmala Sitharaman acknowledged the threat of terrorism faced by both countries, Israeli FM Bezalel Smotrich said India and Israel share strong common backgrounds and can collaborate in cybersecurity, defence, innovation and high-technology sectors.

Here are the key tenets of the India-Israel deal:

1. The India-Israel BIA is expected to boost investments, provide greater certainty, and protection for investors. There will be a push for the growth of trade and mutual investments while ensuring a minimum standard of treatment and an independent dispute resolution mechanism through arbitration. The pact outlines investor protection with the state’s regulatory rights, leaving space for government decision-making.

2. The pact reflects both nations' aim to boost economic cooperation and create a strong investment environment, which will lead to increased bilateral investments between the two countries. The total investment between India and Israel currently stands at around $800 million. The pact forms the basis for exploring more investment opportunities.

3. The Finance Minister says the series of reforms undertaken by India over the last more than 10 years has enabled India to be the fastest growing economy in the world and has created an investment-friendly environment in the country. Both ministers think India and Israel can work together in fintech innovation, infrastructure development, financial regulation, and digital payment connectivity, which will increase innovation and promote investments.

India is Israel’s second-largest country partner in Asia for merchandise trade. Though bilateral merchandise trade has been dominated mainly by diamonds, petroleum products and chemicals, recent years have witnessed an increase in trade in areas such as electronic machinery and high-tech products; communications systems; medical equipment, etc.

Major exports from India to Israel include pearls and precious stones, automotive diesel, chemical and mineral products, machinery and electrical equipment, plastics, textile and apparel products, base metals and transport equipment, agricultural products. Major exports from Israel to India include pearls and precious stones, chemical and mineral/fertiliser products, machinery and electrical equipment, petroleum oils, and defence, machinery and transport equipment.

The total Indian investment in Israel, during April 2000 to April 2025, stood at $443 million, while Israel's direct FDI into India was $334.2 million during April 2000–March 2024. There have been over 300 investments from Israel in India, mainly in the high-tech domain, agriculture and water.