India, Israel may roll out free trade agreement in two stages to deliver early gains

India and Israel are exploring a phased implementation of their proposed free trade agreement (FTA) to ensure quicker benefits for businesses in both countries, commerce and industry minister Piyush Goyal said on Sunday.

The announcement comes days after the two nations signed the terms of reference (ToR) to formally initiate FTA negotiations. The framework covers areas such as tariff reduction, easing non-tariff barriers, investment facilitation, simpler customs procedures, greater cooperation on innovation and technology transfer, and enabling smoother trade in services.

Speaking in Israel, where he is leading a 60-member business delegation, Goyal said both sides are inclined to finalise an initial tranche swiftly. “We are considering doing this in two phases. A decision will be taken when talks begin. Both ministers want the first stage concluded early so that the trade community benefits sooner,” he said.

Goyal and Israeli Economy and Industry Minister Nir Barkat have agreed to prioritise “low-hanging fruit” and avoid contentious issues in the initial phase of negotiations. The discussions are also expected to explore deeper collaboration in research and development, innovation-led investments, and joint projects that combine Israeli expertise with India’s manufacturing scale.

“It is quite possible that we may come out with the first phase of an FTA soon, so that the benefits can start flowing,” Goyal noted.

During the visit, Goyal also highlighted a major infrastructure opportunity for Indian companies. Israel has issued pre-qualification documents for a USD 50 billion metro project in Tel Aviv, involving nearly 300 km of underground tunnelling. The Israeli government, he said, is keen for Indian firms, both public and private, to participate in the bidding. India currently has metro rail systems under construction in 23 cities.

Trade between the two countries has seen a contraction in the current financial year. India’s exports to Israel fell 52 per cent to USD 2.14 billion in 2024–25, while imports declined 26.2 per cent to USD 1.48 billion. Bilateral trade stood at USD 3.62 billion. Despite the dip, India remains Israel’s second-largest trading partner in Asia.

Although diamonds, petroleum products, and chemicals dominate merchandise trade, recent years have witnessed growing exchanges across electronics, high-tech goods, communication systems, and medical equipment. India’s key exports include precious stones, diesel, chemicals, machinery, plastics, textiles, base metals, transport equipment, and agricultural products. Imports largely comprise precious stones, chemical and fertiliser products, machinery, petroleum oils, and defence-related equipment.

Negotiations on the FTA are expected to begin shortly, with both governments signalling a desire for early progress.

With PTI inputs