India-Israel free trade agreement talks to gather pace next month

Talks between India and Israel to explore the possibility of a free trade agreement (FTA) are expected to gain momentum as early as next month, people aware of the matter said.

Discussions and negotiations for an FTA with Israel have been going on for over a decade. However, over the last six months, leaders from both nations have shown enough interest to resume talks to expand bilateral trade ties.

After preliminary discussions between the countries at the end of last year, the process of exchanging items of interest, trade and tariff data had started. “Preliminary discussions had started, but the outbreak of Omicron delayed the talks. Meanwhile, Israel was also having discussions with the United Arab Emirates (UAE) for an FTA. Now that Israel and UAE have concluded the agreement (last week) and (we) will have to complete the procedure of implementation of our trade deal with UAE from 1 May, India will then once again try to engage with Israel,” one of the persons cited above said.

Israel and the UAE concluded negotiations for a free trade deal on 1 April. Similarly, India and UAE had signed the Comprehensive Economic Partnership Agreement (CEPA) in February and the trade agreement is expected to come into effect from May 1.

While external affairs minister S Jaishankar had, in October last year, said that both countries intend to conclude negotiations by June, the official cited above said that as of now there is no clarity regarding the nature of the trade deal. “We would like to re-engage with Israel and see what are the gains in trade, after which we need to finalise the modalities. Once there is clarity (on whether there will be a broader trade deal to an early harvest trade agreement), then we can launch the negotiations. A timeline will be fixed once both countries finalise the modalities,” the official told Business Standard.

Experts said that a trade pact with Israel will have a greater strategic significance and will not be limited to trade and investment. “FTAs are being signed for strategic reasons also and may not look only at the economic gains. In the case of Israel, the deal isn’t significant in terms of economic/commercial gains but because Israel is now a key country for India as we are procuring defence equipment from them,” Biswajit Dhar, professor at Jawaharlal University said.

WhIsrael is India’s 34th largest trading partner. On the other hand, India is Israel’s third largest in Asia and seventh largest globally. Merchandise trade between both nations reached $6.35 billion, excluding defence, during the April 2021-January 2022 period.

Even though the balance of trade has been in India’s favour, the share of exports to Israel is little over one per cent of India’s total exports.

Bilateral trade between the two nations has been dominated mainly by diamonds and chemicals. However, in recent years, there has been an increase in business in areas such as electronic machinery and high-tech products, communications systems, and medical equipment, among others.

Major exports from India to Israel include pearls and precious stones, chemical and mineral products, machinery and electrical equipment, textiles, plastics, rubber, and plants and vegetables, among others.