With an aim to fast-track free trade agreement (FTA) process, the commerce ministry has said that the India and Israel are likely to hold next round of in-person negotiations in May 2026 in Israel. The two sides concluded the first round of four-day talks. Both sides agreed to continue inter-sessional engagements virtually. Both countries are engaged in discussions covering a wide range of areas, including trade in goods and services, rules of origin, sanitary and phyto-sanitary measures, technical barriers to trade, customs procedures, intellectual property rights, digital trade, and other key chapters.

During the ongoing two-day state visit to Israel, Prime Minister Narendra Modi, while addressing a special plenary of the Knesset in Jerusalem on February 25, called for early finalisation of an ambitious FTA to realise the untapped trade potential between the two countries. Both sides noted the untapped potential in key sectors, including machinery, chemicals, textiles, agriculture, medical devices, and advanced technologies.

In November 2025, the two countries signed the terms of reference (ToR) to formally start the negotiations for the pact. In such pacts, two sides significantly reduce or eliminate import duties on maximum number of goods traded between them. Besides, they ease norms to promote trade in services and investments. The ToR include market access for goods by eliminating tariff and non-tariff barriers, investment facilitation, simplification of customs procedures, increasing cooperation for innovation and technology transfer, and easing norms to promote trade in services.

During 2024-25, India's exports to Israel dipped 52 per cent to $2.14 billion from $4.52 billion in 2023-24. Imports, too, fell 26.2 per cent to $1.48 billion last fiscal year. The bilateral trade stood at $3.62 billion. India is Israel's second-largest trading partner in Asia. Though bilateral merchandise trade is dominated mainly by diamonds, petroleum products, and chemicals, recent years have witnessed an increase in trade in areas such as electronic machinery and high-tech products, communications systems, and medical equipment.