New Delhi: India and Israel are deepening their strategic ties, with discussions around a Free Trade Agreement (FTA) gaining momentum. The foundation of their relationship is built on mutual trust, and recent developments indicate significant progress in economic and defense cooperation.
SBI Facilitates Bilateral Trade in Indian Rupees
The State Bank of India (SBI), the only Indian bank with a presence in Israel, is now facilitating bilateral trade in Indian rupees, aiming to simplify transactions between the two countries. According to SBI CEO V. Manivannan, the Reserve Bank of India has allowed Indian banks to settle export and import transactions in Indian currency. Israel has been chosen as a partner country under this initiative.
Through this arrangement, Israeli businesses engaged in imports and exports will be able to make and receive payments in Indian rupees. Transactions will be routed through Special Rupee Vostro Accounts (SRVA) at SBI’s Tel Aviv branch, which has received all the necessary regulatory approvals.
US Trade Talks Remain Stalled
While India strengthens economic ties with Israel, discussions with the United States have faced hurdles. Following “Operation Sindur” on January 10, 2025, the Indian government reached out to the US through lobbyist Jason Miller, who previously worked with the Trump administration. Despite several rounds of talks between Indian officials, the US State Department, and the National Security Council, a trade deal has not materialized. India remains cautious about providing unrestricted access to US agricultural and dairy products to protect domestic farmers, while the US insists on such concessions.
Indian Workforce in Israel Expands
Over 40,000 Indian workers are now part of Israel’s labor market, especially in construction and agriculture. SBI is facilitating NRI account services for these workers, making it easier for them to remit funds to India in rupees. SBI has maintained its Tel Aviv branch since 2007 to support such transactions.
Economic Cooperation Set to Grow
The rupee-based trade initiative comes as both nations seek to maximize economic cooperation. Commerce and Industry Minister Piyush Goyal visited Israel in November 2025, followed by Foreign Minister S. Jaishankar in December. Israeli Prime Minister Benjamin Netanyahu also spoke with Indian Prime Minister Narendra Modi, agreeing to meet soon to discuss further collaboration.
FTA Progress and Investment Treaties
While the India-Israel FTA is not yet fully finalized, the Terms of Reference (ToR) were signed in November 2025, and official negotiations resumed at the end of the year. The initial focus is on goods and services, with broader market access and investment provisions to be addressed in early 2026. Last year, Israeli ministers including Tourism Minister Haim Katz, Economy and Industry Minister Nir Barkat, Agriculture and Food Security Minister Avi Dichter, and Finance Minister Bezalel Smotrich visited India to advance the FTA process. During these visits, both countries signed a Bilateral Investment Treaty (BIT) and a reference document for the FTA.
India’s quiet but decisive steps with Israel signal a strategic pivot that may redefine its trade landscape, even as engagement with the United States faces ongoing complexities.
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