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  October 9th, 2023 | Written by

Israeli-Palestinian Conflict Raises Concerns for Indian Exporters

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The ongoing Israel-Palestine conflict may lead to increased insurance premiums and shipping costs for Indian exporters, raising concerns within the international trade community. While experts believe that the conflict is unlikely to significantly impact trade volumes, it could affect the profitability of domestic exporters, particularly if the conflict escalates further.

Over the weekend, Israel experienced an unexpected and unprecedented multifront attack by the Hamas militant group, which governs the Gaza Strip, involving air, land, and sea offensives in its southern regions.

Global Trade Research Initiative (GTRI), a think tank specializing in international trade, warned that Indian merchandise exporters might face higher insurance premiums and shipping expenses due to the conflict. They suggested that India’s Export Credit Guarantee Corporation (ECGC) might impose higher risk premiums on Indian firms engaged in exports to Israel. ECGC, wholly owned by the Indian government, was established in 1957 to promote exports by providing credit risk insurance and related services.

Sharad Kumar Saraf, the founder chairman of Technocraft Industries India, a Mumbai-based exporter, acknowledged that the conflict could have a short-term impact on Indian exporters. However, he expressed concerns that if the conflict were to escalate, it could worsen the situation for exporters in the region.

Ajay Srivastava, co-founder of GTRI, emphasized that the trade could face serious disruption if operations at Israel’s three largest ports—Haifa, Ashdod, and Eilat—were affected. These ports handle a wide range of shipments, including agricultural products, chemicals, electronics, machinery, and vehicles. Eilat port, situated on the Red Sea, serves as a significant gateway for India’s merchandise trade with Israel. Fortunately, there have been no reports of port disruptions so far. Srivastava noted that the real impact on trade would depend on the duration and intensity of the conflict.

In the fiscal year 2022-2023, India’s merchandise and services trade with Israel is estimated to reach USD 12 billion. Merchandise exports from India to Israel during this period amounted to USD 8.4 billion, with imports from Israel totaling USD 2.3 billion, resulting in a merchandise trade surplus of USD 6.1 billion. Key exports from India to Israel include diesel, polished diamonds, electronics, telecom components, potassium chloride, and herbicides. In addition to merchandise trade, both countries engage in extensive IT services trade, collaborate in agriculture, water technology, and renewable energy research, and are exploring a free trade agreement.

The article also highlighted the significant bilateral ties between India and Israel in tourism, medical innovation, and investments. Indian hospitals import medical equipment and technology from Israel, while Israeli firms invest in Indian healthcare startups. Both nations maintain a robust presence of businesses, including Sun Pharma, Tata Consultancy Services, Wipro, Tech Mahindra, State Bank of India, Larsen & Toubro, and Infosys in Israel. Israeli companies have also made substantial investments in India, particularly in renewable energy, real estate, water technologies, and research and development centers.

Between April 2000 and June 2023, Israeli companies have invested USD 286 million in India, highlighting the growing economic partnership between the two countries.