India’s economic growth has led to growth in its trade worth Israel, and the country is now Israel’s seventh largest export destination, not including arms exports. India is one of the world’s biggest arms importers, and Israel is second only to Russia in arms sales to it.
India became an independent country in 1947 and Israel in 1948, but diplomatic relations between them were established only in 1992. There followed several visits by Israeli government ministers to India, but the great breakthrough has come in the past decade. The warming of relations began with the visit to Israel of Indian Minister of External Affairs Somanahalli Krishna in 2011, and became much more pronounced when Narendra Modi became prime minister of India in 2014. Modi and then Israeli prime minister Benjamin Netanyahu instantly struck up a friendly relationship, and Modi visited Israel in 2017, which was followed by a visit by Netanyahu to India a year later.
The figures show a steady rise in the volume of civilian trade since then, reaching $4.7 billion in 2019 and jumping to $6.6 billion in 2021. The trend has continued in 2022, with trade reaching $3.7 billion in the first half of this year. The biggest item in trade between the two countries is diamonds and precious stones.
Ron Malka, director general of the Ministry of Economy and Industry, who was formerly Israeli ambassador to India, says that India’s great economic advantage is the low average age of its population. This gives it high production capacity at fairly low cost.
Production in India is varied. Alongside the traditional industries, the high technology sector has been developing rapidly in recent decades, and India has become a provider of engineers, programmers, and other technology professionals, to the entire world. Some of the world’s largest technology companies have development centers in Bangalore, India’s technology capital.
What can India and Israel gain from each other? Israel is a global innovation center with groundbreaking technologies, and is of great interest to the Indians. An example is the deal signed by Israeli automated solar panel cleaning solutions company Eccopia Scientific last year whereby the production of the company’s robots was transferred to India, and they are sold to a British company active in the UAE. "This trilateral cooperation is an indicator both of the huge potential of the Abraham Accords, which are creating alliances with additional parties, and of the exploitation of the advantage of each country in this triangle," says Malka.
Israel brings the know-how and the technology, the Indians bring the production line and the manpower, and the UAE provides the market. At a meeting of the Israel-India Chamber of Commerce that took place in Dubai last year, it was estimated that the value of trilateral trade between the UAE, Israel, and India could reach $100 billion by the end of the decade.
Ohad Cohen, head of the Foreign Trade Administration at the Ministry of Economy and Industry, says that exports to India represent 3% of total Israeli exports, and that Israel’s three commercial missions in India focus on Israeli technology. The fastest growth is in what the Central Bureau of Statistics calls "business services", that is, exports of software and advanced technologies. Cohen says that talks have been taking place on a free trade agreement with India for some time, but that these are only initial exploratory moves that have not yet matured into full-blown negotiations.
Solution to Israel’s manpower shortage
The Indian prime minister launched the "Make in India" initiative in 2014 with the aim of positioning the country as a global manufacturing center for advanced technological products. The sector already contributes 16-17% of India’s GDP. The government seeks to create 100 million new jobs in manufacturing sector by the end of 2022, and to increase the sector’s share of GDP to 25% by 2025. Modi’s goal is to turn his country into the world’s largest technology manufacturing center, and global giants such as GE, Siemens, HTC, Toshiba, and Boeing have set up production facilities there.
David Keinan, vice chairman of the India-Israel Chamber of Commerce, who lives in Bangalore, says that India (together with China) has the highest number of high-tech employees in the world, estimated at close to 18 million. He says that India represents an excellent solution to the shortage of manpower in the Israeli technology sector, which until recently relied on engineers from Eastern Europe, and particularly from Ukraine. He states that nearly 50,000 Ukrainian engineers were working for Israeli companies before the Russian invasion, and that now, because of the war, a shortage has arisen.
Israeli software company Amdocs maintains a center in India that employs about 7,000 people, and about 2,500 more people in India are employed in other Israeli companies, a low number relative to the potential. Keinan, who deals in matching technology workers in India to Israeli companies, say that one of the problems is the difficulty in finding small, high-quality teams that suit the needs of the Israeli companies.
Booming arms trade
The collapse of the Soviet Union, which had been India’s main arms supplier, left room for Israeli defense companies to step in. The visit of the minister of defense Moshe Ya’alon to India in 2015, together with senior defense company executives, led to some huge deals.
Among other things, Israel has sold to India warships, radar systems (the Arrow anti-missile system’s Green Pine radar), and missile systems. Notable deals include the $1.8 billion sale of Barak 8 surface-to-air missiles to India’s ground forces, and $400 million in sales of other products by Israel Aerospace Industries.
The sale of Spike anti-tank missiles by Rafael was temporarily canceled in 2018, but has been renewed, and is estimated to be worth some $500 million. One of the reasons for the suspension of the deal was India’s wish to be involved in manufacturing the missile. In fact, Israel’s three largest defense companies, Israel Aerospace Industries, Rafael, and Elbit Systems, maintain production facilities in India in partnership with local companies. Israel’s arms exports to India are estimated to be worth some $3 billion annually.
Published by Globes, Israel business news - en.globes.co.il - on September 11, 2022.
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