On September 8, India and Israel signed a bilateral investment treaty in New Delhi, with Israeli Finance Minister Bezalel Smotrich and his Indian counterpart, Nirmala Sitharaman, presiding over the agreement.
The treaty is intended to “provide greater certainty and protection for investors, facilitating growth of trade and mutual investments.” The treaty also includes provisions to safeguard investments against expropriation, ensure the smooth transfers of capital, and provide compensation for any resulting losses. Smotrich described the agreement on X as “a significant strategic step for our shared vision.”
That shared vision may resonate beyond the bilateral context, hinting at a broader ambition: to quietly advance the stalled India-Middle East-Europe Economic Corridor (IMEC), a U.S.-backed initiative announced in 2023 to connect India to Europe via the Gulf and Israel through new shipping, rail, energy, and digital infrastructure. While IMEC initially showed much promise, it was ultimately stalled as a result of the Gaza war.
Bilateral investments between Israel and India currently stand at just $800 million, a modest figure compared to their roughly $4 billion in annual trade. By embedding stronger safeguards on investment and committing to cooperation in fintech, infrastructure, financial regulation, and digital connectivity, the treaty could lay important groundwork to anchor a broader framework of regional integration down the line.
India and Israel are already strategic partners, with ties spanning the defense, agriculture, and technology sectors. But for Israel, this agreement comes at a delicate moment: some major global investors have pulled back, or threatened to do so, citing grievances over the war in Gaza.
On July 29, the European Commission proposed a partial suspension of Israel’s participation in Horizon Europe, the EU’s 95 billion euro flagship research and innovation program. The move would restrict Israeli start-ups from competing for grants in disruptive technologies such as AI, drones, and cybersecurity.
This summer, Norway’s sovereign wealth fund – the world’s largest – further reduced its exposure to Israeli firms. By mid-August, it held $1.86 billion in 38 Israeli-listed companies, down from 61 companies in June, and Norway’s Finance Minister Jens Stoltenberg warned that “more companies could be excluded.”
Against this backdrop, India’s willingness to formalize investment protections offers Israel an important economic partnership at a time of growing international isolation.
India’s move to deepen its partnership with Israel ties directly into its broader ambitions for regional connectivity. It comes less than two years after the signing of a Memorandum of Understanding for IMEC, which involved the United States, India, the United Arab Emirates, Saudi Arabia, and the European Union.
The corridor’s framework envisions a network of infrastructure stretching from India to Europe, with Gulf ports connected by rail across Saudi Arabia, Jordan, and Israel, and then onward by sea to European ports. In a geopolitical sense, IMEC has been characterized as the U.S. answer to China’s Belt and Road Initiative.
The October 7 attack by Hamas took place mere weeks after the MOU was signed, and the subsequent Gaza war effectively halted progress on Saudi-Israeli normalization. That normalization was seen as crucial to advancing IMEC because of the central role of the Saudi-Jordan-Israel railway link. While normalization would certainly aid the construction of such an ambitious project, it is not strictly necessary.
Even though IMEC enjoys bipartisan support in Washington – with U.S. President Donald Trump even calling it “one of the greatest trade routes in all of history” – the war in Gaza has made regional integration politically toxic, particularly for Arab governments whose publics are outraged over the conflict. This has stalled the momentum for the initiative.
Despite the complications, India has been strategically deepening its bilateral ties with many of the corridor’s key nodes, including the UAE, Saudi Arabia, and Israel. This week’s deal with Israel mirrors a bilateral investment treaty India signed with the UAE in 2024. In April 2025, Indian Prime Minister Narendra Modi visited Saudi Arabia, where he and Saudi Crown Prince Mohammed bin Salman expanded the India-Saudi Strategic Partnership Council and agreed on major new energy and investment projects. The two leaders also signed cooperation agreements in space, health, sports, and postal services, and created ministerial committees to manage political, defense, economic, and cultural ties. Seen in this context, the Israel-India treaty, while bilateral, may be read as a step toward keeping the IMEC concept alive, even as its political underpinnings remain uncertain.
Whether IMEC itself is revived in its original form remains to be seen. But the bilateral deal between India and Israel suggests that the economic logic of integration is advancing quietly, even as politics lag behind.