India, Israel elevate ties; fast-track FTA, UPI link, mobility boost
India and Israel elevated their bilateral relationship to a "Special Strategic Partnership for Peace, Innovation and Prosperity" during high-level diplomatic engagement in February 2026.
Prime Minister Narendra Modi met Israeli PM Benjamin Netanyahu; the two leaders signed 17 MoUs and agreements across energy, digital payments, trade, defence, agriculture, education, and cultural cooperation.
Key announcements:
FTA: First round of India-Israel Free Trade Agreement (FTA) negotiations conducted (23-26 February 2026, New Delhi); both leaders directed officials to conclude a "mutually beneficial FTA" quickly; second round of negotiations scheduled in Israel (May 2026).
UPI in Israel: National Payments Corporation of India (NPCI) and Israel's MASAV signed an MoU to enable UPI-based cross-border remittances between India and Israel — facilitating payments for the large Indian diaspora in Israel and Indian tourists.
Critical and Emerging Technology Partnership: A new bilateral cooperation framework in tech and innovation sectors established.
Defence: Roadmap for joint development, joint production, and technology transfer in defence equipment — building on India's existing largest defence import relationship with Israel.
Energy and Maritime: Cooperation in oil, gas, and maritime heritage.
Current bilateral merchandise trade: USD 3.62 billion (FY 2024-25) — modest but with significant potential given sectoral complementarities.
Bilateral ties: India established full diplomatic relations with Israel in January 1992; the relationship has been on a consistent upward trajectory, with PM Modi's 2017 visit being the first standalone bilateral visit by an Indian PM to Israel.
India-Israel Relations: Historical Evolution
India-Israel relations have undergone a fundamental transformation over the past three decades — from Cold War-era distance to a robust strategic partnership driven by technology, defence, and diaspora connectivity.
Key Details
- Pre-1992: India recognised Israel in 1950 but did not establish full diplomatic relations, prioritising Arab world support and solidarity with Palestine. India abstained on the 1947 UN partition resolution for Palestine.
- 1992: Full diplomatic relations established after the Cold War ended and India launched economic liberalisation — Indian foreign policy became more pragmatic.
- 1999: Kargil War — Israel provided critical intelligence and military support, strengthening ties significantly.
- 2017: PM Modi's standalone visit to Israel — first by any Indian PM; cemented the "strategic partnership."
- 2023-26: Despite the Gaza conflict (October 2023 onwards) straining India's balancing act, bilateral state-to-state relations continued to deepen through technology, defence, and trade channels.
- India's position on Gaza: Called for restraint, humanitarian access, and a two-state solution — maintaining calibrated balance between Israel partnership and traditional Arab/Muslim world relationships.
- 2026: Elevation to "Special Strategic Partnership" — the highest tier in India's bilateral framework (previously held by the US, Russia, UK, France, Germany, Japan, and a few others).
The elevation to Special Strategic Partnership reflects the maturation of India-Israel ties beyond defence — encompassing trade, technology, and people-to-people connectivity — making it one of India's most multi-dimensional bilateral relationships.
UPI as a Tool of India's Digital Diplomacy
The Unified Payments Interface (UPI) has become one of India's most powerful soft power instruments — its expansion into foreign markets represents the internationalisation of India's Digital Public Infrastructure (DPI).
Key Details
- UPI: Launched in 2016 by NPCI (National Payments Corporation of India) under RBI regulation; operates on the Immediate Payment Service (IMPS) backbone.
- UPI transaction volume (FY25): Over 17,000 crore transactions (~USD 2.1 trillion in value) — world's largest real-time retail payments system.
- International UPI: Already operational (for Indian card-holders) in Singapore, UAE, France, UK, Bhutan, Nepal, Malaysia, Mauritius, Sri Lanka, Bahrain, Oman, and Japan.
- UPI in Israel: NPCI-MASAV MoU enables cross-border remittances — key for India's ~85,000-strong diaspora in Israel and growing tourist/business travel.
- G20 2023 (India Presidency): India proposed DPI as a global standard and pushed for UPI-like interoperability between national payment systems of all G20 nations.
- RuPay card: India's domestic payment card network (by NPCI) — also being expanded internationally alongside UPI.
- India's DPI exports: UPI model being adopted or studied by over 40 countries; IndiaStack (Aadhaar + UPI + DigiLocker + e-KYC) presented as a model for developing nations.
UPI's expansion to Israel is part of India's deliberate "DPI diplomacy" — using digital payments infrastructure as a tool to deepen bilateral economic integration, strengthen diaspora remittance flows, and project India's technological leadership globally.
India-Israel Defence Ties and Technology Transfers
Defence cooperation is the backbone of India-Israel relations, with Israel consistently ranking among India's top two or three defence suppliers (alongside Russia and France).
Key Details
- Israel is India's second-largest defence supplier (after Russia) — supplies include: Phalcon AWACS systems, Barak anti-missile systems, Heron and Harpy UAVs (drones), Spyder air defence systems, Spike anti-tank missiles, Elbit surveillance systems.
- Defence trade: Israel accounts for approximately 15-20% of India's total defence imports annually.
- Joint production: Indian companies (HAL, Bharat Dynamics, DRDO) have collaborated with Israeli firms (Elbit, Rafael, IAI) on component manufacturing and technology co-development.
- India's defence modernisation: India's defence budget for FY26 is INR 6.81 lakh crore (~USD 78 billion); government policy prioritises 'Atmanirbhar Bharat' — self-reliance in defence manufacturing.
- Israel-India cyber cooperation: Israel's Unit 8200 expertise in cyber intelligence has been shared through training and cooperation agreements.
- FTA and defence: An FTA could facilitate easier procurement of Israeli defence items by eliminating tariffs and simplifying contractual frameworks.
The new "roadmap for joint development, joint production and technology transfer" in defence announced during the 2026 engagements represents a qualitative leap — moving from India as buyer to India as co-developer and co-producer of Israeli-origin defence systems.
Free Trade Agreements: India's FTA Strategy with West Asian and Middle Eastern Partners
India is rapidly expanding its FTA architecture to cover key trade partners — West Asia and the Middle East are a critical region given India's energy imports, remittances, and diaspora.
Key Details
- UAE CEPA (2022): India's first trade deal in over a decade — signed in 88 days; bilateral trade target USD 100 billion; covers goods, services, investments.
- GCC-India FTA: Under negotiation with the Gulf Cooperation Council (Saudi Arabia, UAE, Qatar, Kuwait, Bahrain, Oman) — potentially India's largest FTA market for energy and diaspora.
- India-Israel FTA: Negotiations began in 2010; stalled for years; first round of current negotiations completed February 2026 — second round in Israel (May 2026).
- Israel's trade: Israel is a high-income, innovation-driven economy with strengths in technology, agricultural tech, pharma, and defence — complementary to India's manufacturing base.
- India's FTA priorities: Securing market access for pharmaceuticals, IT services, textiles, and gems/jewellery; protecting sensitive sectors (dairy, agriculture) from cheap imports.
- India-Israel bilateral trade: USD 3.62 billion (FY25) — well below potential; an FTA could unlock sectors like agricultural technology, chemicals, machinery, and defence.
The first round of India-Israel FTA talks (February 2026) marks the real beginning of FTA negotiations after 14 years — driven by the political will demonstrated in the Special Strategic Partnership declaration.
- India-Israel diplomatic relations established: January 1992.
- Previous relationship tier: "Strategic Partnership" (2017) — upgraded to "Special Strategic Partnership" (2026).
- MoUs signed (2026): 17 covering energy, digital payments, defence, agriculture, education, culture.
- Bilateral merchandise trade: USD 3.62 billion (FY 2024-25).
- FTA first round: 23-26 February 2026, New Delhi; second round: Israel, May 2026.
- UPI-MASAV MoU: NPCI + Israel's MASAV — enables cross-border UPI remittances.
- Indian diaspora in Israel: ~85,000 (includes IT professionals and workers in construction/caregiving).
- Israel's defence exports to India: Consistently ranks 2nd or 3rd largest supplier; key systems: Phalcon AWACS, Barak, Heron UAV, Spike missiles, Spyder.
- India's defence budget FY26: INR 6.81 lakh crore (~USD 78 billion).
- UPI transaction FY25: 17,000+ crore transactions worth ~USD 2.1 trillion.
- Countries with UPI: 20+ countries operational or MoU signed (Singapore, UAE, France, UK, Bhutan, Nepal, Malaysia, Israel, etc.).
- India's two-state solution position: Supports an independent State of Palestine living side by side with Israel in peace and security.
- PM Modi's 2017 Israel visit: First by any sitting Indian PM — established "Strategic Partnership."