India and Israel have spent years building one of their closest strategic partnerships, sharing deep ties in defense, technology, and security cooperation. Yet for all the diplomatic warmth and high-level visits, the actual money flowing between the two nations has remained surprisingly thin. By 2024, the total accumulated stock of mutual investment stood at roughly $360 million, a figure that pales in comparison to what one might expect given the political significance and technological promise of the relationship. The new bilateral investment treaty that entered into force on July 4, 2026, is an attempt to close that embarrassing gap.
Signed in New Delhi in September 2025, the treaty restores a legal framework that has been missing since India walked away from the previous agreement back in 2017. It offers investors meaningful protections, including national treatment in comparable circumstances, safeguards against arbitrary government conduct, protection from expropriation without fair compensation, rules governing the transfer of investment-related funds, and access to international arbitration under certain conditions. Nobody should pretend the treaty will suddenly make India an easy market for Israeli companies. What it does provide is a sturdier legal and institutional foundation for firms willing to put down roots, build local relationships, and focus on sectors where Israeli capabilities meet clearly defined Indian strategic needs.
The agreement also reflects a growing recognition in both capitals that strategic relationships cannot survive indefinitely on defense contracts and diplomatic goodwill alone. If the partnership is to mature, it must generate sustained investment, joint production, research collaboration, and deeper industrial links. That matters because Israeli firms have long viewed India as a market of immense potential but also one of considerable complexity. The regulatory environment can be difficult to navigate, decision-making often moves at a glacial pace, and implementation varies widely across ministries, states, and sectors. In defense and dual-use industries, where commercial, technological, regulatory, and national security considerations are tightly woven together, these challenges become even more pronounced.
Technology transfer will likely remain the most stubborn obstacle. India is no longer content simply buying finished systems off the shelf. Its policies increasingly emphasize domestic manufacturing, co-development, maintenance, training, supply-chain integration, and the building of indigenous technological capabilities. This creates a genuine strategic dilemma for Israeli companies, which must ask themselves which technologies can be shared and which must remain protected, whether the Indian market is large enough to justify local production, and whether they are prepared to maintain a presence over several years rather than chase a single transaction. The cultural gap between Israeli and Indian business practices only adds to the challenge. Indian business culture runs on personal trust, continuity, and long-term relationships, something Israeli firms accustomed to speed and informality sometimes find difficult to navigate.
Where the treaty may prove most valuable is in sectors like semiconductors, where India’s strategic need is urgent and Israeli expertise is genuinely hard to replace. India views chip capabilities as essential to economic security, defense modernization, digital infrastructure, and technological autonomy, giving it a strong incentive to create favorable conditions for partners who can fill specific capability gaps. Israel brings real strengths in chip design, sensors, secure hardware, advanced testing, artificial intelligence applications, and specialized dual-use technologies. The broader lesson extends well beyond semiconductors though. Israeli firms should not approach India merely as a vast marketplace for existing products but should instead start by carefully mapping Indian priorities and identifying areas where pressing strategic needs intersect with distinctive Israeli advantages. The treaty reduces some political and legal risks, but it does not remove structural barriers or override national security screening. Whether the partnership deepens meaningfully now depends less on governments signing papers and more on whether companies on both sides are willing to do the patient, unglamorous work of building something that lasts.