Exercise Desert Knight - 21 is a bilateral air exercise between the Indian Air Force and the Air Force of France (option 2). This exercise is conducted in order to enhance the interoperability and cooperation between the two air forces.

Option 1: USA - This is incorrect. While the Indian Air Force has conducted air exercises with the United States in the past, Exercise Desert Knight - 21 specifically involves the Air Force of France.

Option 3: Britain - This is incorrect. While the Indian Air Force does conduct air exercises with the United Kingdom, Exercise Desert Knight - 21 does not involve the Air Force of Britain.

Option 4: Israel - This is incorrect. While India has a strong defense relationship with Israel, Exercise Desert Knight - 21 does not involve the Israeli Air Force.

In conclusion, the correct answer is option 2: France.