India and Israel Deepen Defence Ties, Advance Technology and Trade Cooperation

India and Israel have agreed to take their defence ties to the next level by “substantially” stepping up cooperation during the two-day visit to Israel by Prime Minister Narendra Modi. At a time when global supply chains are being recalibrated and security alliances are under renewed scrutiny, this marks the latest in a series of steps taken by the two countries to strengthen a partnership that has steadily evolved from defence procurement to strategic collaboration and beyond. “India and Israel would look to take their defence industrial ties to the next level and advance discussions on the free trade agreement (FTA),” Mr Modi said, standing alongside Israeli Prime Minister Benjamin Netanyahu.

Joint Development and Technology Transfer

Another major highlight of the visit was the agreement to engage in joint development and production of defence equipment. Instead of adhering to the traditional buyer-seller model, there is a clear commitment to move beyond it—an approach that aligns with India’s broader push for defence indigenisation and resilient supply chains in an increasingly uncertain global environment.

Israel has long been one of India’s largest defence suppliers, providing sophisticated equipment including air defence systems, drones, radars and smart weapons. For India, which is seeking to strengthen its domestic defence capabilities under the “Make in India” initiative, such a partnership in defence development assumes even greater significance today.

The two sides have also agreed to engage in “horizon scanning”—a technique that enables both countries to assess emerging defence technologies that could pose threats or create opportunities for national security. According to India’s foreign ministry, the partnership would enhance “strategic foresight, risk assessment, and long-term technology planning,” including the use of artificial intelligence-based analytical tools—an area that has gained urgency amid rapid advances in AI-driven warfare capabilities.

Expanding Labour and Economic Engagement

Beyond defence, the visit resulted in agreements in the economic and labour domains. Israel has agreed to allow 50,000 additional Indian workers into the country over the next five years, particularly in the manufacturing sector.

This decision comes at a time when Israel continues to face labour shortages, exacerbated in recent years by regional instability and disruptions to workforce mobility. Indian workers have historically contributed significantly to sectors such as construction, agriculture and services. The move is expected to support Israel’s industrial growth while creating employment opportunities for skilled Indian workers.

Negotiations over a possible free trade agreement have also gained renewed momentum. While discussions have been ongoing for years, both nations now appear keen to fast-track the process in the context of shifting global trade dynamics. This could lead to reduced customs duties, deeper technology collaboration and increased trade volumes. Bilateral trade has already shown steady growth, particularly in defence, agriculture and technology sectors.

Diplomatic Context: West Asia Tensions

The visit comes amid continued geopolitical unease in West Asia. Ongoing tensions surrounding Iran’s nuclear programme and the prolonged conflict in Gaza have added layers of complexity to the regional landscape. In this context, India’s geopolitical positioning assumes greater importance.

During a joint press briefing, Prime Minister Modi reaffirmed India’s commitment to efforts aimed at restoring peace in Gaza and the wider region. He reiterated that India would continue engaging with all stakeholders in pursuit of lasting stability in West Asia. India’s balancing act—maintaining strong ties with Israel while preserving its longstanding relations with the Arab world and Iran—remains a defining feature of its foreign policy, especially at a time when global polarisation is intensifying.

A Strategic Partnership Comes of Age

India and Israel established formal diplomatic relations in 1992. Since the late 1990s, defence cooperation has been a central pillar of the partnership. In recent years, collaboration has expanded to include water management, agricultural technology, cybersecurity and innovation.

The growing emphasis on joint production and technology transfer signals a shift towards a more mature and strategic partnership, rather than a purely transactional one. As modern warfare becomes increasingly technology-driven, the relevance of such partnerships has only deepened.

For India, the partnership offers access to cutting-edge defence technologies. For Israel, India represents not only a vast market but also a key strategic partner in Asia at a time when regional alignments are evolving.

The significance of Prime Minister Modi’s visit to Israel lies in the continued consolidation of the Indo-Israel partnership, extending beyond defence into technology, industry and labour cooperation. In today’s complex and shifting geopolitical environment, the commitment of both nations to strengthening their strategic ties is evident. The success of joint defence initiatives and progress on the free trade agreement will be crucial in shaping the next phase of this evolving partnership.

Article 2

The rupee nears 91 again as risk-off flows and dollar demand test RBI’s strategy

The Indian rupee is once again poised to touch the psychologically significant 91-per-dollar mark, driven by a combination of global risk sentiment, sustained dollar demand and domestic market pressures. One-month non-deliverable forward (NDF) contracts in the offshore market indicate a possible opening in the 90.98–91.02 band, following the rupee’s settlement at 90.9050 in the previous session.

The 91 mark has emerged as a crucial near-term support-resistance level for the rupee. While the currency has approached this level multiple times, it has avoided a decisive breach, largely due to the presence of the Reserve Bank of India (RBI).

Dollar demand and corporate flows

Bankers cite sustained dollar demand—particularly linked to NDF maturities and corporate requirements—as a key factor behind the pressure. This, coupled with importers increasing their dollar hedges amid heightened short-term volatility and uncertain global cues, has kept demand elevated even during recent pullbacks.

In addition, weakness in the Indian equity market has added to the rupee’s challenges. Foreign portfolio investors (FPIs), whose flows significantly influence the currency in the short term, have remained cautious in recent months amid global uncertainties and valuation concerns. In the absence of central bank intervention, market participants suggest the rupee could have already slipped decisively past the 91 level. Its inability to appreciate even when other Asian currencies have strengthened points to underlying fragility.

RBI’s tactical defence strategy

The Reserve Bank of India appears to be adopting a calibrated approach to defending the currency, rather than an aggressive one. Market traders indicate that the RBI is supplying dollars at multiple levels to curb sharp movements in the dollar-rupee exchange rate.

This measured intervention helps contain volatility without directly unwinding long dollar positions in the market. However, repeated defence of the 91 level may also sustain speculative interest around this threshold.

The broader approach suggests that the RBI is prioritising exchange rate stability over targeting a specific level. With India’s foreign exchange reserves remaining comfortable, the central bank appears willing to manage volatility rather than aggressively push the rupee higher—especially in the current uncertain global environment.

Global risk-off mood weighs on Asia

The pressure on the rupee comes amid a broader risk-off sentiment in global markets. Asian currencies have faced intermittent pressure as investor risk appetite weakens, particularly following volatility in U.S. equities and persistent geopolitical tensions, including those in West Asia.

Safe-haven flows into U.S. Treasuries have influenced global currency dynamics. While lower U.S. yields typically weaken the dollar, periods of uncertainty often see the dollar strengthening regardless, due to its safe-haven appeal.

Oil prices, highly sensitive to geopolitical developments in the Middle East, have remained volatile in recent months. Any sustained rise in crude prices could widen India’s trade deficit and add further pressure on the rupee—an especially relevant risk given India’s dependence on energy imports.

Why the 91 level matters

The significance of the 91 level is both psychological and technical. A sustained break above this threshold could trigger stop-loss orders, accelerating depreciation. Conversely, holding below it reinforces the perception that the RBI remains committed to preventing disorderly currency movements.

From a macroeconomic perspective, a mildly weaker rupee could support exports, particularly in sectors such as IT and pharmaceuticals. However, excessive volatility risks fuelling inflation, especially in energy and commodity-linked segments.

Domestic factors in focus

Beyond global cues, domestic factors will also shape the rupee’s trajectory. Equity flows, inflation trends and expectations around monetary policy remain critical. Robust growth data and contained inflation could provide some support. However, persistent FPI outflows or heightened global risk aversion may continue to outweigh domestic positives.

The repeated testing of the 91 mark underscores the delicate balancing act being undertaken by the RBI. Global headwinds, sustained dollar demand and volatile oil prices continue to weigh on the rupee. As a result, the currency may hover around these levels unless there is a meaningful improvement in global investor sentiment and capital inflows.

The RBI’s approach suggests a clear preference for stability over sharp appreciation—an indication that, in the current environment, managing volatility remains a higher priority than defending any specific level.