India-Israel Sign Historic Bilateral Investment Treaty

India-Israel Sign Historic Bilateral Investment Treaty: Boosting Economic Partnership and Investment Security

India and Israel have ushered in a new era of economic cooperation by signing a landmark Bilateral Investment Treaty (BIT) on September 8, 2025, in New Delhi. This treaty marks a historic milestone in their bilateral relations, as Israel becomes the first OECD member country to enter into an investment agreement under India’s innovative new investment treaty framework. Signed by India’s Union Minister of Finance and Corporate Affairs, Smt. Nirmala Sitharaman, and Israel’s Finance Minister, H.E. Mr. Bezalel Smotrich, the agreement reflects a shared commitment to fostering a robust investment ecosystem and expanding trade and mutual investments.

The Foundation of the New Investment Framework

The treaty comes under India’s reformed investment treaty regime, designed to provide a more balanced and investor-friendly framework that ensures greater certainty and protection for investors while preserving the state’s regulatory rights. The agreement addresses key areas such as safeguarding investments against expropriation, ensuring transparency, and allowing smooth transfer of funds and compensation for losses. A significant highlight is the inclusion of an independent dispute resolution mechanism through arbitration that aligns with international best practices, providing investors with confidence and legal recourse.

A Historic Leap in India-Israel Economic Relations

India and Israel share growing economic and strategic ties, with bilateral trade currently standing at approximately USD 4 billion annually and mutual investments totaling around USD 800 million. The new BIT is expected to accelerate this trend by creating a secure environment that encourages increased bilateral investments. Previously, India’s Overseas Direct Investment (ODI) in Israel reached approximately USD 443 million, while Israeli Foreign Direct Investment (FDI) in India was around USD 334 million. The treaty will help unlock the full potential of these investments by reducing risks and improving clarity for investors.

Strategic Sectors and Cooperation Opportunities

The treaty opens doors to enhanced collaboration in sectors where both nations excel. Areas such as cybersecurity, defense, innovation, high-technology, fintech, infrastructure development, and digital payment connectivity are expected to benefit significantly from increased investment flows. Israel’s leadership in cutting-edge technology and innovation complements India’s large-scale market potential and evolving infrastructure, making this treaty a catalyst for joint ventures, research and development, and technology exchanges.

Balancing Investor Rights and Sovereignty

A distinctive feature of this treaty is its careful balance between investor protection and India’s sovereign right to regulate in the public interest. This provision ensures that while investors receive fair and non-discriminatory treatment, India retains adequate policy space to enact regulations for economic, social, and environmental reasons without compromising the treaty’s protections. This balance is crucial for sustaining long-term economic growth in a manner aligned with national priorities.

Impact on Regional and Global Standing

Israel’s status as an OECD member and its signing of this treaty demonstrate India’s expanding engagement with advanced economies. It positions Israel as a key partner in India’s global economic strategy and serves as a model for future investment agreements with other OECD nations and high-income countries. Additionally, the treaty strengthens the broader India-Israel strategic partnership beyond economics, enhancing diplomatic and defense cooperation.

Future Outlook and Business Implications

The signing of the BIT coincides with Israeli Finance Minister Bezalel Smotrich’s visit to India, aimed at deepening economic ties and laying the foundation for a prospective Free Trade Agreement (FTA). Business leaders on both sides have expressed optimism about new opportunities for cooperation, emphasizing how the treaty will create a conducive business environment and bolster investor confidence. The agreement is projected to facilitate smoother financial transactions, reduce bureaucratic hurdles, and enhance transparency, making India and Israel attractive destinations for mutual investments.

The India-Israel Bilateral Investment Treaty marks a significant step in advancing economic cooperation, providing a strategic framework that benefits investors and governments alike. As the first OECD country to join India under this new treaty regime, Israel sets a precedent for enhanced global partnerships. This agreement not only augments financial and technological collaboration but also underpins the broader relationship between these two vibrant democracies, promising sustained growth, innovation, and prosperity.