http://www.meforum.org/3494/india-israel-ties
Since their establishment in January 1992, Israeli-Indian relations have improved dramatically. Israel has emerged as a major Indian trading partner in the Middle East with bilateral trade rising from a meager US$100 million to over $6.6 billion.[1] Cooperation in the military-security arena has similarly grown,[2] and there are widespread popular exchanges between the people of the two countries. The Israeli ambassador is the most sought after diplomat in New Delhi after his U.S. counterpart, and Indo-Israeli ties seem extraordinarily robust. Yet failure to acknowledge the limitations of this relationship would be costly.
India’s Israel policy falls into three broad phases. Beginning in the early 1920s, the nationalist leadership adopted a pro-Arab position, which largely continued until January 1992. Its recognition of the Jewish state in September 1950 did not materially alter this stand. The adoption of a pro-Arab stand was seen as critical for its interests in the Middle East and was pursued through a pro-Palestinian foreign policy. While it did not identify with the Arab extremism of that period, recognition without relations was the hallmark of Indian policy until January 1992. The end of the Cold War and the transformation of the global order brought an end to this zero-sum approach as New Delhi concluded that, in order to make a difference in this new era, it was both possible and necessary to maintain normal relations with the Israelis and the Palestinians, who seemed to be moving toward a historic reconciliation. Shortly after the decision to normalize relations with Israel was announced on January 29, 1992, the two countries opened diplomatic missions and paved the way for increased political, economic, cultural, and security cooperation.
After the Congress party returned to power in 2004, bilateral relations moved to a third and more complex phase. In a radical departure from its pre-1992 position, New Delhi began to delink bilateral relations from the vagaries of the peace process. While disagreements with Israel over the peace process had earlier prevented full normalization of relations, New Delhi quietly began to pursue the peace process as if there were no bilateral relations with Israel and to pursue bilateral relations as if there were no differences with Israel over the peace process. This move was not only inevitable but has also been critical for the consolidation of the bilateral relations.
However, New Delhi continues to maintain some of its core pre-1992 positions vis-à-vis the Palestinians. Most importantly, it continues to support the pursuit of Palestinian political rights that will result in the formation of a sovereign and independent state coexisting with Israel. Ever since its decision to recognize the Palestine Liberation Organization (PLO) as the “sole and legitimate” representative of the Palestinians, political ties and interactions have improved and strengthened between the two parties with the PLO mission in New Delhi granted embassy status in early 1980. At that time, the Israeli representation was still confined to a consulate in Mumbai, which was often described as India’s diplomatic Siberia. In November 1988, India was among the first countries to recognize the “state of Palestine,” proclaimed by the PLO in Algiers, and began receiving PLO chairman Yasser Arafat and his successor, Mahmoud Abbas, as heads of state. In the wake of the Oslo agreement, in 1993, India opened a separate mission in the Gaza Strip. As has been the practice in the West, the Gaza mission reported directly to the Foreign Office in New Delhi and not to the Indian embassy in Tel Aviv. When the situation in Gaza became more difficult, the mission was moved to Ramallah in the West Bank in 2004.