India, Israel in talks for free trade agreement

Context:

India is in dialogue with Israel for concluding a Free Trade Agreement (FTA) according to Commerce and Industry Minister.

Relevance:

GS-II: International Relations, GS-III: Indian Economy

Dimensions of the Article:

1. Trade relations between India and Israel
2. Free Trade Agreement (FTA) between India and Israel
3. Way Forward for FTA talks between Israel and India
4. Back to basics: History of India–Israel relations
5. Bilateral Cooperation on defence between India and Israel

Trade relations between India and Israel

• India was the third-largest Asian trade partner of Israel in 2014.
• Israeli companies have invested in India in energy, renewable energy, telecom, real estate, water technologies, and are focusing on setting up R&D centers or production units in India.
• Trade in diamonds constitutes close to 40% of bilateral trade.
• The first recipients of grants from the Israel-India Industrial R&D and Technological Innovation Fund (I4F) [to help Israeli entrepreneurs enter the Indian market] were announced in July 2018, including companies working to better the lives of Indians and Israelis through efficient water use, improving communications infrastructure, solar energy use, and life-changing surgeries.

Free Trade Agreement (FTA) between India and Israel

• Discussions regarding FTA have been going on between India and Israel for more than a decade.
• First round of negotiation was held in 2010 and several rounds of attempts to negotiate have taken place since then – however, talks have lapsed over a number of issues, including Israel’s reluctance to include an agreement on services in trade.
• During the last round of talks in 2021, both sides explored the possibility of a Preferential Trade Agreement for about 200 goods – which had also not been concluded.
• The latest effort for an FTA with Israel comes on the back of the government’s recent drive to resume a number of trade negotiations – such as the push to resume talks with the U.K., Australia and the European Union.
• The FTA, if agreed upon, will open the Israeli market for Indian businesses in a more favourable way.

Way Forward for FTA talks between Israel and India

• The two sides must expedite talks on trade and investment in an effort to take bilateral ties to the next level.
• A Free Trade Agreement (FTA) as well as a Bilateral Investment Treaty (BIT) at the “earliest” would forge greater business-to-business ties.
• Indian and Israeli innovation ecosystems together can create a global impact.
• It will scale up India’s manufacturing sectors and also bring greater partnership in new R&D projects in India in areas like digital healthcare, agriculture and water.

Back to basics: History of India–Israel relations

• India and the State of Israel have an extensive economic, military, and strategic relationship.
• India’s position on the establishment of the State of Israel was affected by many factors, including India’s own partition on religious lines, and India’s relationship with other nations.
• Indian independence leader Mahatma Gandhi believed the Jews had a good case and a prior claim for Israel, but opposed the creation of Israel on religious or mandated terms. Gandhi believed that the Arabs were the rightful occupants of Palestine, and was of the view that the Jews should return to their countries of origin.
• Albert Einstein wrote a four-page letter to Jawaharlal Nehru in 1947, to persuade India to support the setting up of a Jewish state. (Einstein’s request was not accepted).
• India voted against the Partitioning of Palestine plan of 1947 and voted against Israel’s admission to the United Nations in 1949.
• It was only in 1950, that India officially recognised the State of Israel.

Bilateral Cooperation on defence between India and Israel

• The strategic cooperation between the two countries began during the Sino-India War of 1962 and improved when Israel supplied M-58 160-mm mortar ammunition to India in the war against Pakistan in 1965.
• Israel was also one of the few countries that chose not to condemn India’s Pokhran nuclear tests in 1998.
• India is the largest buyer of Israeli military equipment and Israel is the second-largest supplier of military equipment to India after Russia.
• Israel has been among the top four arms suppliers to India for almost two decades now, notching military sales worth around USD 1 billion every year.
• The Indian armed forces have inducted a wide array of Israeli weapon systems over the years, which range from Phalcon AWACS (airborne warning and control systems) and Heron, Searcher-II and Harop drones to Barak anti-missile defence systems and Spyder quick-reaction anti-aircraft missile systems.
• Military and strategic ties between the two nations extend to intelligence-sharing on terrorist groups and joint military training.

-Source: The Hindu