India and Israel Seal Landmark Bilateral Investment Treaty: A New Era of Economic Cooperation

India and Israel have taken a major step forward in their economic partnership with the signing of a Bilateral Investment Treaty (BIT) in New Delhi on September 8, 2025. The agreement was finalized by India’s Finance Minister Nirmala Sitharaman and Israel’s Finance Minister Bezalel Smotrich, accompanied by senior officials from both sides. This marks the first time an OECD nation has adopted India’s revised investment framework, giving the treaty both symbolic and practical significance.

The signing coincides with Smotrich’s official three-day visit to India, which includes meetings with Commerce Minister Piyush Goyal, Housing Minister Manohar Lal Khattar, and planned visits to Mumbai and Gandhinagar’s GIFT City, signaling a commitment to expanding economic collaboration.

Finance Minister Nirmala Sitharaman and Israel’s Finance Minister Bezalel Smotrich(X) | Livemint

Protecting Investors and Encouraging Business

The treaty has been designed to reassure investors from both nations by providing clear rules, dispute resolution mechanisms, and international standards of protection. It covers sensitive areas such as fair treatment, non-discrimination, safeguards against expropriation, and full transparency in regulatory practices. Investors will also have the option to pursue arbitration for disputes, but only after attempting to resolve issues through local remedies for up to five years—striking a balance between investor confidence and national sovereignty.

Israeli officials highlighted that this framework brings "clarity and stability" for businesses, ensuring that investment flows are backed by legal certainty. On India’s part, Finance Minister Sitharaman described the agreement as a milestone that would not only strengthen trade and investment but also foster cooperation in innovation, financial services, infrastructure, and digital connectivity.

Laying the Groundwork for a Free Trade Agreement

While the BIT itself is significant, it is also widely seen as a prelude to a broader Free Trade Agreement (FTA). Israel’s Chief Economist Shmuel Abramzon remarked that although no timeline has yet been fixed, the agreement provides the right foundation for “pre-negotiations” toward a comprehensive trade pact. Such a step could potentially double or even triple bilateral trade volumes, deepening ties beyond investment protection into wider market access.

India has been actively expanding its investment treaty network in recent years, engaging in talks with over a dozen countries including Saudi Arabia, Russia, Switzerland, and Australia. The India-Israel agreement thus fits into New Delhi’s larger global strategy of securing reliable frameworks for cross-border investment and trade.

Strategic Relations Beyond Economics

The significance of the treaty extends beyond financial collaboration. India and Israel share a long history of cooperation across defense, intelligence, agriculture, and technology. Israel has been among India’s largest defense partners, while projects like the Indo-Israeli Agriculture Project (IIAP) have introduced advanced farming methods to Indian farmers through Centers of Excellence.

By signing this agreement, both nations are reaffirming their intent to deepen cooperation not only in trade and investment but also in strategic sectors like fintech, defense technology, renewable energy, and digital transformation. The pact reinforces the idea that India–Israel ties are no longer limited to traditional areas but are expanding into cutting-edge industries that will define the economies of the future.

The MGMM Outlook

India and Israel’s signing of the Bilateral Investment Treaty (BIT) on September 8, 2025, marks a historic leap in their partnership, not just in economic terms but in building long-term strategic trust. This treaty is the first time an OECD nation has embraced India’s revised investment framework, a signal of global confidence in New Delhi’s policies. It reassures investors by ensuring fairness, transparency, and protection while balancing sovereignty through dispute resolution safeguards. The signing, held in New Delhi with the presence of Finance Ministers Nirmala Sitharaman and Bezalel Smotrich, comes alongside Israel’s outreach to India’s financial and innovation hubs, including GIFT City, showcasing a broader commitment to growth and cooperation.

From our perspective, this agreement is not just about protecting investors—it is about charting a new direction for India’s global economic diplomacy. The BIT lays the foundation for deeper trade engagement, potentially leading to a Free Trade Agreement, while also expanding cooperation in fintech, renewable energy, digital connectivity, and defense technology. For India, this represents an affirmation of its rising global standing and a chance to secure stable, future-oriented partnerships. For Israel, it diversifies economic opportunities in Asia while strengthening one of its most trusted democratic partnerships.

(Sources: Livemint, Business Today, Times of India)