The ongoing war between Israel and the pro-Palestinian group Hamas has raised talks in business circles that trade between Israel and India will be adversely affected. According to experts from the Global Trade Research Initiative (GTRI), Indian companies engaged in exporting goods to Israel may face heightened risk premiums from ECGC Ltd, a government-owned export credit agency. The unexpected multi-front attack by Hamas on southern Israel has left Indian exporters apprehensive. While the immediate consequences seem manageable, there are growing concerns about the situation worsening as the conflict continues to escalate.
Of particular concern is the condition of Israel’s major ports. If the ongoing conflict puts the three key ports – Haifat, Ashdod, and Eilat – under attack in this ongoing war environment, it will undoubtedly impact trade, affecting the shipment of various goods, including agricultural products, chemicals, electronics, machinery, and vehicles.
Eilat Port, situated on the Red Sea, plays a pivotal role in the India-Israel trade, which was estimated at around USD 12 billion in merchandise and services during the 2022-2023 fiscal year. India primarily exports diesel (USD 5.5 billion) and cut and polished diamonds (USD 1.2 billion) to Israel. The gems and jewelry trade between India and Israel in 2021-22 amounted to USD 2.8 billion but is expected to decline to USD 2.4 billion in 2022-23.
On the flip side, India imports rough diamonds (USD 519 million) and cut and polished diamonds (USD 220 million). While gems exporters are apprehensive about the impact the war might have on their businesses, the Gem Jewellery Export Promotion Council (GJEPC) said that the rising tension between Israel and Palestine is not likely to have any adverse impact on the gem and jewellery industry’s exports.
“Israel primarily serves as a re-export market. While the ongoing situation in Israel is of grave concern to us, we express our solidarity with the Israeli diamond trade during this hour of crisis for their nation. It is too early to definitively assess the impact and we are keeping a strict watch on the situation. We have not witnessed any disruption in the regular dealings and believe it is unlikely to significantly impact India’s gem and jewellery trade with Israel. Nevertheless, we remain hopeful for a swift resolution and the return of peace at that very important geo-political and economic region,” GJEPC Chairman Vipul Shah told PTI.
The GJEPC Vice Chairman Kirit Bhansali informed that the industry will not have much impact as from October 15 onwards. Most of its members are planning to stop imports of rough due to high inventory. “The industry will stop imports of roughs from October 15 till December 15 to ease domestic inventory. Also, we don’t export much to Israel. We mainly import roughs and re-export. So, the ongoing war between Israel and Palestine will not impact the gem and jewellery in the country,” he added.
It is to be noted that the trade between India and Israel has fallen by almost 27% from USD 2,794.39 million in 2021-22. And, the imports and exports of gems and jewellery with Israel have recorded an annual decline of 42.3 % and 13.8%, respectively, due to the high inventory situation in India.
Apart from this, it is believed that other trade between the two nations might see some effect as India imports electronics and telecom components like ICs and photovoltaic cell parts (USD 411 million), potassium chloride (USD 105 million), and herbicides (USD 6 million) from Israel.
Moreover, Israel’s expertise in medical innovation has led to Indian hospitals importing medical equipment and technology, while Israeli companies invest in Indian healthcare startups. Israeli firms have invested USD 286 million in India between April 2000 and June 2023, reflecting the strength of their economic ties.
Amidst these challenges, Indian industries that are likely to see the situation’s impact should closely monitor the evolving situation in the Israel-Hamas conflict to adapt their strategies accordingly.