Economic Highlights

New Delhi, 22 January 2018

India & Israel

GROWING ECONOMIC BOND

By Shivaji Sarkar

India and Israel, two nations with hostile neighbourhood, came together for boosting economic ties during the recent visit of Israeli Prime Minister Benjamin Netanyahu. While nine agreements were signed in cyber-security, tech start-ups, oil and gas, space technology and film production, the Israeli demand for FTA got mired in Prime Minister Modi’s push for the FDI route instead. But as India opens up the market, the gain for Israel would predictably be much more.

The two leaders also discussed cooperation such as agriculture, science and technology, defence and security. However, the $500 million Spike anti-tank guided missiles from the Rafael deal is to be renegotiated and an Indian official team is likely to visit Israel to have a fresh look into it.

Notwithstanding the vote against Jerusalem as its capital, Israel has bestowed special trust on India. This is perhaps because of the cycle of history which gradually brought the two nations closer since the establishment of formal diplomatic relations in 1992. During the Prime Ministership of Atal Bihari Vajpayee, the two enjoyed bilateral relations in Israel’s civilian and defence technologies. The trade between the two has now reached $4.36 billion and India’s acquisition of Israeli defence products is valued at over $1 billion as against $200 million in 1992,

Remember, India acquires almost one-third of Israel’s defence production. Its market is significant for the Jewish state as the US has banned Israel from selling hi-tech defence products to China. In terms of investment, Israel will invest $68.6 million to boost cooperation in areas such as tourism, technology, agriculture and innovation over a period of four years. This is in addition to the India-Israel Technological Innovation Fund of $40 million over five years with equal contribution from both sides.

Since 2000, India has received $130 million investment from Israel. Its saline water purifier, one presented to the people of Gujarat this visit, would help boost its business prospects but at the same time benefit the people in India, where water quality is poor. Its technology to produce water from the air would undeniably be a boon for the arid regions.

Modi is upbeat with the visit and says “We are venturing into less explored areas and are indicative of our desire to diversify and broad-base engagement.” And thus, as a precursor to long-term relations, bilateral visits of 100 young persons from science-related education streams would be starting soon.

The important deals include, Indian Oil signing letters of intent with Israel’s Phinergy for cooperation on making metal-air batteries and with Yeda Research and Development Co for collaboration on concentrated solar thermal technologies. Israel’s Saare Tzedek hospital signed an agreement with India’s Ministry of Health and Family Welfare as well. Israel Institute of Technology has an accord with Ministry of Science and Technology.

While Modi met 130 businessmen from over 100 Israeli companies, with all showing keenness on setting ups shops in India; Netanyahu met top India businessmen, including Ajay Piramal, Adi Godrej, Harsh Goenka, Anand Mahindra, Dilip Sanghvi, Ashok Hinduja, Atul Punj and Chanda Kochar. 

At the same time, Israel has given New Delhi a list of 200 products on which it would like tariffs removed, to make it easier access to Indian market, as Netanyahu wants India to simplify its mercantilist policies. Modi has suggested to the Israelis to opt for the FDI route to set up starts ups or other businesses to create an atmosphere of mutual benefit. This would obviate the need for what Israel is demanding – a free trade accord (FTA).

The FDI route seems to have been understood by Chairperson of Israel-India chamber of Commerce Anat Berstein Reich, in Netanyahu’s delegation, who said: “Indians are now looking to invest in start-ups. It’s totally new thing to Indians in general, since they are risk averse. But they’re willing to look at Israeli start-ups, understanding that the innovation is here”.

However, Netanyahu wants the FTA in addition to his businessmen investing in India to give his companies a boost, partly needed for his political support in his run up to the Israeli elections. The success of India visit means a lot for Israelis as business with countries supporting terrorism wanes.

The Israeli PM also assured he was working for a direct flight to Tel Aviv to reduce the nine-hour flight time to around five hours for flourishing of business. Israel, he said was innovative. At its end, New Delhi wants to take benefit from Israel’s various scientific and farm activities, particularly for Indian scientists who should learn raising farm production through less use of water and other inputs. Likewise, Israel has mastered cyber-security and India especially on its way to digitization, has a lot to learn. So it needs in new battery technology as it goes for more of solar production.

Not all of these could be measured in terms of money. But it is expected to make lots of savings and benefit mutually the two countries as Indian companies invest in Israel. Tech Mahindra has emerged as one of the biggest telecom companies in Israel and is seeking to invest in 20 start-ups in Israel such as cyber-security, fin-tech and data analytics. The firm is working in Israel since 2014, after purchasing Israeli telecom network Lead-Com from a US company for $240 million. Many other Indian businesses are working in area like finance and technology, including the Tatas, Ashok Leyland and some State governments.

Since Modi became prime minister, the ties have been blossoming with an increase in the frequency of high-level visits. Both External Affairs Minister Sushma Swaraj and Home Minister Rajnath Singh had significant trips to Israel. Earlier visit of Israeli President Reuven Rivlin to India in November 2016 and by President Pranab Mukherjee to Israel in October 2015, helped set the tone.

The growing understanding between the two countries is also seen as unique. The joint statement mentions Palestine, expecting an early peace with Israel and Iran, an ally of India. It speaks of the accommodative attitude of the two countries based on mutual recognition and effective security arrangements for durable peace in the region. Be that as it may, the economic bond is on course for further expansion under Modi and Netanyahu, who have developed a chemistry needed to take it forward. ---INFA

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