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Tuesday, September 9, 2025

India and Israel: A Bilateral Investment Agreement That Reflects a Deeper Strategic Bond

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In geopolitics, not every agreement signed between nations deserves celebration. Too often, bilateral treaties are dressed up in diplomatic jargon and quietly filed away, with little real impact. But the new Bilateral Investment Agreement (BIA) signed in New Delhi between Finance Minister Nirmala Sitharaman and her Israeli counterpart Bezalel Smotrich is not one of those symbolic deals. This one matters—and it matters deeply.

Why? Because it isn’t just about investment flows or technical clauses. It’s about trust, intent, and direction in the India–Israel relationship. And it is as much about what it signals to the world as about what it promises to deliver at home.

Let us begin with the basics. Israel has become the first OECD country with which India has signed an investment treaty under its new model framework. For context, India scrapped dozens of bilateral investment treaties in 2017 after realizing that older versions exposed the country to a flood of investor-state arbitration claims. Since then, New Delhi has been cautious, offering a tougher, India-centric model that prioritizes investor protection without compromising sovereignty.

For Israel to sign on under this model—when many Western nations remain hesitant—speaks volumes. It’s not just a legal endorsement. It’s a vote of confidence in India’s economic governance.

But more importantly, it places Israel in a special category: a partner India trusts enough to pioneer a new path with.

Strip away the jargon of “reciprocal investments” and “financial protocols,” and this deal reveals a deeper story. Israel is not just another trading partner. It is one of the few countries that has consistently stood by India in moments of vulnerability—whether supplying defense technology when others hesitated, or sharing water and agricultural innovations that transformed our farms.

So when the two nations now commit to strengthening investment protection and opening new avenues for cooperation, it’s not merely about economics. It’s about solidifying a strategic partnership that blends security, innovation, and economic resilience.

Israel brings to the table an unmatched edge in cybersecurity, agritech, and cutting-edge innovation ecosystems. India brings scale, markets, and an unmatched talent pool. This agreement, if executed with sincerity, could be the bridge that merges Israeli ingenuity with Indian scale.

India’s new treaty model has often been criticized as being too rigid for global investors’ liking. But Israel’s acceptance is telling. It suggests that New Delhi’s cautious balancing of sovereignty and investor protection is workable—at least with trusted partners.

This may now encourage other OECD members to reconsider their skepticism. And that is a quiet but significant diplomatic victory for India.

It also highlights another point often missed in policy commentary: Israel is willing to bet on India’s rise. At a time when some Western economies raise doubts about India’s regulatory environment, Israel is planting its flag firmly, not as a fair-weather partner but as one willing to take the long view.

The optics of this signing are worth noting. Smotrich did not arrive with a token delegation. He brought with him Israel’s Director General of Finance, Chief Economist, Accountant General, and the head of the Securities Authority. In other words, the entire financial brain trust of Israel’s state machinery.

That level of engagement signals seriousness. It shows that Israel views this not as a one-off gesture, but as part of a strategic economic embedding into India’s growth story.

On the Indian side, Sitharaman’s signature is also politically significant. It shows that under Prime Minister Narendra Modi’s leadership, the India–Israel partnership is not going to remain confined to defense and agriculture—it is expanding into finance, infrastructure, and innovation-driven growth.

In an increasingly fragmented world, this agreement is more than just bilateral paperwork. It carries global implications:

  1. Validation for India’s Model: For years, global investors have complained that India’s post-2017 treaty model was too restrictive. Israel’s embrace offers credibility and could set a precedent for others.
  2. Shift in Israel’s Focus: Israel’s traditional economic orientation leaned westward—toward the U.S. and Europe. By deepening its economic roots in India, it signals a deliberate tilt eastward, hedging against overdependence on its traditional partners.
  3. Democracies Building Trust: In an age where authoritarian states weaponize trade and finance, two democracies are choosing to deepen economic relations grounded in fairness and transparency. That itself is a political statement.

The potential unleashed by this treaty is vast. Consider a few scenarios:

  • Digital Services and Cybersecurity: India’s IT prowess combined with Israel’s cyber defense systems could set global standards for digital trust.
  • Startups and Innovation Pipelines: Imagine Tel Aviv’s startups accessing India’s market scale, or Bengaluru’s innovators leveraging Israeli tech mentorship.
  • Agriculture and Water Management: With climate change battering food security, Israeli water innovation fused with Indian agritech could be a lifeline for millions of farmers.
  • Financial Cooperation: The proposed financial protocol could unlock better credit terms for exporters, a boon for Indian businesses eyeing global reach.

But this potential won’t realize itself. It requires sustained political will, bureaucratic efficiency, and business community participation. Treaties are ink on paper until they are lived in boardrooms, laboratories, and farms.

The ministers have already laid out markers for what comes next—Sitharaman invited to Israel, the idea of a Finance Ministry representation in India, and the instruction for joint teams to carry forward momentum. These are not small steps. They are institutional commitments to move beyond symbolic gestures into permanent frameworks of cooperation.

As someone who has watched India’s economic diplomacy evolve over the years, I see this treaty as a quietly transformative moment. Not transformative in the headline-grabbing way of mega defense deals or dramatic state visits, but transformative in the way strong foundations are laid.

Because make no mistake—India and Israel are not just signing an economic treaty. They are declaring that they trust each other enough to shape the rules of future engagement together.

It is this trust, built over decades of shared challenges and unwavering support, that makes the India–Israel bond unique. And in today’s world, where trust is the rarest currency in international relations, that is perhaps the most valuable outcome of all.

The signing of this Bilateral Investment Agreement is not a ceremonial act—it is a statement. It is India telling the world that Israel is more than an arms supplier or an innovation hub; it is a trusted partner in building resilient economies. And it is Israel signaling that among the rising powers of the 21st century, India is the one it is betting on.

In diplomacy, such signals matter. They shape perceptions, anchor partnerships, and define trajectories.

This is why the India–Israel BIA is not just groundbreaking—it is historic. Because it tells us something fundamental: in a fractured, uncertain world, India and Israel have chosen certainty—with each other. And that choice could define the next chapter of their friendship.

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