The India-Israel relationship is conventionally narrated through defense sales, intelligence sharing, and agricultural technology transfer. This framing, while accurate, is incomplete. It obscures a more consequential possibility: that the two countries’ most durable strategic convergence may lie in co-developing the technologies that will define 21st-century manufacturing: heavy electrical equipment, industrial automation, and robotics. Unlike defense cooperation, which is transactional and bounded by procurement cycles, an industrial partnership of this kind would embed itself in supply chains, capital flows, and workforce ecosystems on both sides, making it structurally harder to unwind and therefore more strategically valuable.

The Geoeconomic Backdrop

The post-pandemic and post-2022 geopolitical environment has converted what were once ordinary industrial inputs (semiconductors, robotics, grid equipment, industrial software) into instruments of statecraft. Governments are no longer optimizing supply chains for cost alone; they are optimizing for resilience and trusted partnership. For example, a recent India’s Finance Ministry review warned that rapid advances in AI, geopolitical tensions, and supply chain weaponization pose growing risks to economic stability. It urged faster policy action and structural reforms to strengthen resilience and sustain long-term growth. This is the logic behind “friend-shoring” and behind India’s own production-linked incentive (PLI schemes) architecture across electronics, telecom equipment, and advanced manufacturing.

Within this environment, India and Israel have been deliberately deepening the institutional scaffolding for economic convergence, even as regional turbulence has complicated the picture. The two governments signed a Bilateral Investment Agreement in September 2025 to protect and encourage mutual investment flows, and in November 2025 they signed the Terms of Reference to begin negotiating a comprehensive Free Trade Agreement, talks that continued into 2026, with Prime Minister Modi publicly urging early conclusion during a Knesset address. In January 2026, the State Bank of India moved to enable rupee-based trade settlement with Israel, a modest but symbolically important step toward reducing dollar dependence in bilateral commerce. A renewed India-Israel Industrial R&D and Innovation Fund (I4F), running through 2027, continues to underwrite joint technology projects.

Yet the relationship is not frictionless. Bilateral merchandise trade (excluding defense) fell from roughly $6.53 billion in FY2023-24 to about $3.75 billion in FY2024-25, a decline both governments attribute to regional........

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