India and Israel have started the first round of negotiations for a free trade agreement (FTA) here with an aim to further boost commercial ties and promote investments, an official said.

The four-day talks will end on February 26, the official said.

In November last year, the two countries signed the terms of reference (ToR) to formally start the negotiations for the pact.

In such pacts, two sides significantly reduce or eliminate import duties on maximum number of goods traded between them. Besides, they ease norms to promote trade in services and investments.

The ToR include market access for goods by eliminating tariff and non-tariff barriers, investment facilitation, simplification of customs procedures, increasing cooperation for innovation and technology transfer, and easing norms to promote trade in services.

The ongoing negotiations are important as Prime Minister Narendra Modi is visiting Israel on February 25-26.

India and Israel were engaged earlier also to negotiate a similar agreement. Eight rounds were held, but talks stalled later. The last round was held in October 2021. Now both sides have again started the negotiations.

During 2024-25, India’s exports to Israel dipped 52% to $2.14 billion from $4.52 billion in 2023-24. Imports, too, fell 26.2% to $1.48 billion last fiscal year. The bilateral trade stood at $3.62 billion.

India is Israel’s second-largest trading partner in Asia.

Though bilateral merchandise trade is 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, and medical equipment.

Major exports from India to Israel include pearls and precious stones, automotive diesel, chemical and mineral products, machinery and electrical equipment, plastics, textiles, apparel, base metals and transport equipment, and agricultural products.

Imports include pearls and precious stones, chemical and mineral/fertiliser products, machinery and electrical equipment, petroleum oils, defence, machinery, and transport equipment.

“The FTA will open the doors for greater market access, flow of capital, ..both in goods and services, remove obstacles in doing business, provide clarity and predictability to our economic engagement,” Commerce and Industry Minister Piyush Goyal had said in November in Tel Aviv.

In September last year, both countries inked a Bilateral Investment Agreement (BIA), under which India reduced the local remedies exhaustion period for Israeli investors to 3 years from 5 years.

During April 2000 and June 2025, India received USD 337.77 million foreign direct investment (FDI) from Israel.

Israel is a high-income, technology-driven market of under 10 million people.

India and Israel are likely to sign a bilateral investment treaty during the upcoming visit of Israeli Finance Minister Bezalel Smotrich this week, while laying the groundwork for a free trade agreement (FTA) to boost trade between the two countries, according to sources.

Mr. Smotrich will be on a three-day visit to India next week between September 8 and 10, during which he will meet Union Finance Minister Nirmala Sitharaman, Commerce and Industry Minister Piyush Goyal and Minister of Housing and Urban Affairs Manohar Lal Khattar.

Besides, the Israeli Finance Minister will also visit Mumbai and the GIFT City in Gandhinagar.

“The aim of this visit is to deepen Israel’s economic and financial ties with India through bilateral meetings and prepare common ground for some of the key agreements, including bilateral investment treaty (BIT) and free trade agreement (FTA),” sources told PTI in Jerusalem.

“Both countries have been negotiating a draft bilateral investment treaty (BIT) and have concluded the negotiations. The Finance Ministers are expected to sign the BIT during the visit.” The BIT between the two countries assures appropriate protection to Israeli and Indian investors, in light of relevant international precedents and practices.

It is likely to enhance the comfort level and boost the confidence of investors by assuring a minimum standard of treatment and non-discrimination, while providing for an independent forum for dispute settlement through arbitration.

Israel has signed BITs with over 15 countries since 2000, including the UAE, Japan, the Philippines, Thailand, and South Africa.

“BIT reflects both nations’ shared commitment towards enhancing economic cooperation and creating a more robust and resilient investment environment. The BIT is expected to pave the way for increased bilateral investments, benefiting businesses and economies in both countries,” one of the sources said.

This is the fourth visit by any Israeli Minister to India this year.

Israeli Minister of Tourism Haim Katz, Minister of Economy and Industry Nir Barkat and Minister of Agriculture and Food Security Avi Dichter visited India earlier this year.

India and Israel are strategic partners, and bilateral trade between the countries is close to $4 billion annually.

Cumulative ODI from India to Israel during the period April 2000 to April 2025 was $443 million, and Israel’s direct FDI into India during the period April 2000 – March 2025 was $334.2 million.

As active members of institutions like the World Bank and the Asian Development Bank, both countries can co-finance Multilateral Development Bank (MDB) backed projects or support joint initiatives in third countries, particularly the global south.