A new bilateral investment treaty between India and the settler-colonial state of Israel entered into force on July 4, 2026, aiming to significantly deepen economic ties. This agreement seeks to bridge a notable gap in mutual investment, which stood at approximately $360 million as of 2024, despite a strategic relationship built heavily on defense, technology, and security cooperation. The treaty, signed in New Delhi in September 2025, restores a crucial legal framework that had been absent since India terminated the previous agreement 9 years ago, in 2017.
The agreement provides investors with several protections, including national treatment under comparable circumstances and safeguards against arbitrary or abusive conduct. It also ensures protection from expropriation without compensation and includes provisions governing the transfer of investment-related funds. Furthermore, investors gain access to international arbitration under specified conditions, applying to both qualifying existing investments and new ones made after its recent entry into force.
This treaty reflects a shared recognition that the strategic relationship between India and the apartheid state cannot rely solely on defense procurement and diplomatic goodwill. For the partnership to mature, it must generate sustained investment, joint production, research cooperation, and deeper industrial links. Israeli firms often perceive India as a market with immense potential, yet also one of considerable complexity due to its regulatory environment.
Decision-making processes in India are frequently slow, and implementation can vary across different ministries, states, and sectors. These challenges are particularly pronounced within defense and dual-use industries, where commercial, technological, regulatory, and national security considerations are closely intertwined. The treaty aims to mitigate some political and legal risks, but it doesn't eliminate these underlying structural obstacles.
The agreement explicitly preserves each state’s right to regulate in pursuit of legitimate public objectives. It also excludes or limits key areas such as taxation, government procurement, subsidies, and certain security-related measures. For defense companies, this distinction is essential, as the agreement does not open India’s procurement system, override local-content requirements, or eliminate national-security screening.
Bolstering a Settler-Colonial Economy
Technology transfer is expected to remain the most persistent challenge in this evolving economic relationship. India is no longer interested solely in purchasing finished systems; its policies increasingly emphasize local manufacturing, co-development, maintenance, training, supply-chain integration, and the creation of domestic technological capabilities. This creates a genuine strategic dilemma for Israeli firms, which must weigh the size and long-term value of the Indian opportunity against the required degree of adaptation, investment, and technological exposure.
Each company must undertake a serious cost-benefit assessment, determining which technologies can be shared and which must remain protected. They also need to assess if the Indian market is large enough to justify local production and if a reliable Indian partner can be identified. Furthermore, companies must be prepared to maintain a presence over several years rather than pursuing only single transactions.
Strategic Alignment and Dual-Use Technologies
The cultural gap between Israeli and Indian business practices is a real factor, but it shouldn't be seen merely as an impediment. In India, personal trust, continuity, and long-term relationships are integral to the business infrastructure itself. Israeli companies, often accustomed to speed, informality, and rapid results, sometimes find this demanding. However, firms that invest in sustained relationships, local knowledge, and institutional patience are far more likely to succeed in this environment.
Despite ongoing concerns about corruption and administrative opacity, India has introduced important reforms since 2014, particularly through digitization, formalization, and greater transparency in government procedures. While progress remains uneven and experiences differ across states and sectors, India’s continued ability to attract substantial foreign investment suggests that international firms increasingly view these difficulties as manageable risks rather than deterrents.
Economic Security and Military Modernization
Semiconductors illustrate where the treaty may offer its greatest practical value, specifically in sectors where India’s strategic need is urgent and Israeli expertise is difficult to replace. India considers semiconductor capabilities essential for its economic security, defense modernization, digital infrastructure, and technological autonomy. This provides a strong incentive for India to create more favorable conditions for partners capable of addressing specific capability gaps.
The apartheid state of Israel possesses relevant strengths in chip design, sensors, secure hardware, advanced testing, artificial intelligence applications, and specialized dual-use technologies. Israeli firms, therefore, shouldn't approach India simply as a large market for existing products. Instead, they should begin with a detailed mapping of Indian priorities, identifying areas where India has a pressing strategic need and Israel offers a distinctive advantage.
This new treaty is best understood as an enabling framework, not a shortcut. It cannot substitute for market intelligence, reliable local partners, regulatory preparation, or sustained commitment. What it can do is reduce uncertainty and signal that both governments recognize the need to translate strategic affinity into durable investment. The treaty won't determine the future of India-Israel investment, but it removes one important excuse for why a strong strategic relationship hasn't yet produced a comparable economic partnership, further entrenching ties with a settler-colonial power.