India-Israel Free Trade Agreement and Relations

Following the establishment of Indo-Israel diplomatic relations in 1992, the volume of New Delhi-Tel Aviv bilateral (non-defence civilian) trade has almost crossed $5 billion annually. As such, the two countries have just completed two decades of partnership in several areas, including trade and commerce, though strategic issues continue to be the focal point of the relation.

It thus comes as no surprise that most of the Indo-Israel trade, till now, has evolved on defence. The increased arms spending by India has created a big natural market for the Israeli military technologies, including early airborne radar systems (EARs) and unmanned pilotless vehicles (UMVs). Defence-oriented trade ties between the two sides are set to expand as India accounts for a mere 30 per cent of its defence component procurement from home. That could require Israeli companies to set up or outsource manufacturing centres in India.

India Israel Trade

Of late, however, the signing of the Free Trade Agreement between the two countries has hogged the limelight. For the uninitiated, New Delhi and Tel Aviv are slated to hold another round of talks by March end about signing the FTA for achieving a bilateral trade volume of $10-15 billion per year. They had earlier negotiated on the issue during the minister of external affairs SM Krishna’s visit to Tel Aviv. But what good would befall India from its trade ties with Israel, and the FTA, one would be tempted to ask.

Well, Tel Aviv is trying to manage the changing balance of the world economic powers. Countries like India and China have recorded faster growth indices and offer more prospects than the slower and older economies of the US and Europe. The latter two, traditionally, have been the biggest consumers for the export-heavy economy of Israel. Closer business and trade ties with India would also strengthen Israel’s political standpoint in the global community.

Second, the FTA is expected to remove several trade barriers. Andhra Pradesh is reportedly close to inking an agreement with Matimop, an Israeli government agency which facilitates multinational and trans-regional research and development work. Besides, Tel Aviv is negotiating bilateral accords with two other Indian states.

The FTA could be the proverbial game changer in India’s relation with West Asia. Several times in the past, New Delhi and Tel Aviv have had exhaustive exchange of views about the future of Arab Spring, the rise of Islamic radicalism, the Middle East peace process etc. Though India has made its intentions clear that it doesn’t want to be dragged into the controversy on Iran’s nuclear programme and US policy thereto, it has been open to all other areas of cooperation with Israel. The two sides have also discussed the shift in the global power equation, especially the rise of China as a dominant player.

As 2012 marks the 20th anniversary of the establishment of Indo-Israel ties, it could also be a watershed year in bilateral trade and commerce. Having already established a strong strategic and defence partnership, the time is apt for the two sides to forge stronger trade ties.

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