India-Israel partnership: Scalable, logical and inevitable

The recent visit of Israeli Prime Minister Benjamin Netanyahu to India, is about connecting with his Indian counterpart Prime Minister Narendra Modi and to take the relation to new levels. This strategic level meeting has brought into focus Indo-Israeli trade ties and how they can scale up.

In the last 25th year since formally establishing commercial relations (1992) with Israel, there is much to be cheerful about for both economies. The bilateral trade in 1992 was lower than USD 200 million and today it stands in the USD 4-5 billion bracket, which basically argues that there were good things waiting to happen. Whether all the good things have happened is the question, and surprisingly the answer is not positive.

If one were to look at the non-defence annual trade figures for the past few years, there is prima facie some sense of disappointment is evident. Overall the figure shows a decline and there is stagnancy at best since three years, around the USD 5 billion mark. Informal assessment of the current year again puts the FY2018 figure in the USD 4.5-5 billion range. Given that overall interactions have improved in the 2014-17 period under the present government, this is an anomaly.

However, this needs to be looked at more closely. Traditionally, a good part of the trade consists of India procuring diamonds from Israel, polishing them and sending them back. This used to be more than 60 per cent of the total trade which has now dropped to 50 per cent and is likely to reduce further. Hence, the figures now are much more concrete, in the sense they represent value-addition to a greater extent.

Particulars (USD billion)2011-122012-132013-142014-152015-162016-17
Exports to Israel4.043.743.743.292.823.00
Y-O-Y growth % -7.440.19-12.2-14.256.38
Imports from Israel2.642.362.322.322.101.97
Y-O-Y growth % -10.57-1.910.71-10-7.64
Total trade6.686.106.065.614.924.97
Y-O-Y growth % -8.68-0.62-7.27-12.491.01
Balance of trade1.401.381.420.970.721.03

Source: Web reports

Another aspect of the trade figures is that there is a rise in services component, but not visible simply because the Israeli configuration does not look separately at services. If one were to look at services as an activity, Indian estimates are that it contributes USD 400 million to the overall component.

Beyond that, if we were to look at categories within exports, there are roughly ten categories which are showing individual figures of between USD 30 million to USD 300 million— organic chemicals, electronics and medical equipment being among them. Electronics and medical equipment figure likewise in Israeli imports, along with fertilisers and steel. Clearly, there is multi-sector breadth and acceptance, which has now to be scaled up.

The process is on for a while now—in agriculture for example. The Indo- Israel Agricultural Cooperation Project (signed in 2008) is showing results, where Israel is contributing its cultivation expertise. While Israel receives rainfall much lower than the global average, the country has innovated in desalination, irrigation and cultivation techniques to the extent of being an acknowledged global leader. Israel recycles 90 per cent sewage water to potable level.

India-Israel partnership: Scalable, logical and inevitable

MASHAV, the Israeli agency for international co-operation initiatives, focused on the agricultural cooperation project. This is through identification of, and inculcation of good practices in, 30 centres of excellence nationwide, wherein 16 are activated. The results are there for all to see – in Karnal (Haryana) for instance, a nursery was established and seedlings from there given to the local cultivators. The strong increase in productivity is shown in the vegetable cultivation figures alongside:

CropOpen fieldProtected Cultivation
Cherry tomatoN/A72,000

Source: MASHAV

To give some context, it is estimated that 20,000 farmers visit the Karnal centre each year and benefit from the thought processes and technology. Beyond the yield, there were additional reported benefits via reduced usage of both fertilisers and pesticides.

Likewise, at the Dapoli (Maharashtra) centre, the focus was on the traditional mango harvest. Aged mango orchards (with declining output) were rejuvenated, and plantation activity has been done with greater density, with great success.

Mango rejuvenation (per season)
ParametersBeforeAfter three years
Density100 trees/ ha400 trees/ ha
Yield1,500 kg/ ha4,500-5,000 kg/ ha

Source: MASHAV

The same collaboration in food can now be extended to food processing. Consider these factors:

  • India, being blessed with among the largest arable land tracts globally and a predominantly vegetarian population, has been prominent in output in terms of foodgrains, fruits and vegetables.
  • This has been achieved despite consistently low productivity standards, an area where Israel can add immense value.
  • India’s food processing canvas has three distinct advantages – the top end has absorbed latest technologies, the lower end has massive capital efficiency and the breadth of input and output is magnificent.
  • Food processing is vital as a value-add for India and as a source of further durable and sustainable food supply for Israel.
  • Lastly, Israel is much higher on the GDP and per capita income ranks worldwide compared to its population ranking which argues a certain level of prosperity and propensity to spend on processed foods.

This industry is a scalable investment and collaboration opportunity. Israel, for its size, has a surprising diversity in climate, soil and topography alternatives. Its floriculture, horticulture and cuisine are also varied and therefore there is much scope for corporate collaborations.

ParameterLatest estimateGlobal rank
Population88 million97
GDP (apx)$350 billion54
Per capita income (apx)$40,00035

Source: Wikipedia

There are similar opportunities and those are being looked at.

  • For instance, Israel is again a leader in smart cities technologies worldwide, where Israel is looking at contributing technological inputs to 25-26 locations across India.
  • This aspect – technology used as a tool to improve monitoring, interaction and speed of transaction processing – is very vital for India at a time when the urbanisation ratio is set to go up.
  • Likewise, the water management technologies – sewage water treatment especially – would also be critical for new urban civic bodies.

One more significant area of trade (services) would be tourism. India’s tourism potential has been documented worldwide and now there is genuine intent from the current Government to provide support services to encash this. Israel, as indicated, has lots of diversity in climate and attractions which bring in tourists worldwide. The tourism from India has been on the rise, as can be seen alongside. Also it is documented that average tourist spend from India (around $1,250-1,400) is above the average tourist spend in Israel.

YearEstimated tourists
2017 (Jan-Nov)54,000

Source: Web reports

Clearly, there is much to look forward to. Now let us look at the areas of constriction. First is the Government level, where independent analysts have clarified much of the issues. Bharat Karnad, Professor for National Security Studies, Centre for Policy Research, New Delhi has been an observer and commentator on military and foreign policies in a realistic framework. His view is that a basic hurdle to Israeli technocrats getting into India is the restriction of sub-50 percent equity holding, a real constraint when proprietary technology is part of the discussion. Even otherwise, there is the rigmarole of laws, implementations and regulations that India still requests compliance. There is much work to do on the business-friendliness front.

Not that intent is an issue. India, in strategic terms, has always been seen as an ally, even in diplomatically difficult times. It is on records that Jews, the predominant population of Israel, have never been persecuted in India. Israel can, indeed, be a key technology supplier to India in the defence sector where India is among the largest purchasers. That said, the DRDO dissatisfaction for low level of technology transfer is also a tangible matter to take on record. Indeed, some developments to that end are already in process. There is just so much low-hanging fruit which has to be picked and matters taken forward.

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