India-Israel ties: Trade, technology, tourism to be template for next 25 years
Tuesday afternoon at Ben Gurion airport was one for the books. As Prime Minister Narendra Modi disembarked from Air India One and engaged his counterpart Benjamin Netanyahu in a bear hug, it marked the beginning of the first ever state visit by an Indian prime minister to Israel. The optics were encouraging; Netanyahu gave Modi the red carpet welcome that’s otherwise reserved for Israel’s closest allies and the Pope.
Modi on his part has also been gracious enough to accord this visit the attention and visibility it deserves. Not only has he kept Ramallah off his itinerary (having already hosted the Palestinian president in New Delhi earlier in the year), he also honoured the memory of the victims of the Holocaust at Yad Vashem and paid tribute to the founding father of modern Zionism, Theodor Herzl.
And in another well-judged move, Modi is scheduled to meet 11-year-old Moshe Holtzberg, whose parents were murdered in the Chabad house attack during the 2008 Mumbai carnage. Moshe, barely two years old at the time, was rescued by his Indian nanny Sandra Samuel. It is worth mentioning here that in December 2008, when then minister of state for external affairs E. Ahamed presented the government of India’s views on the attack at the UN, he listed all the buildings that had been targeted except one: the Chabad house. Nine years later, when Modi meets young Moshe, it will be portrayed as a reminder of the common security challenges that both India and Israel face but it will also perhaps be the most genuine acknowledgement of India’s embrace of the Jewish nation.
That said, it is important to place the evolution of India’s Israel policy in context.
Since India established full diplomatic ties with Israel in 1992, relations between the two countries have grown at an astonishing pace, covering a wide range of issues from defence and homeland security, to agriculture and water management, and now education and even outer space. And while Modi and his Bharatiya Janata Party (BJP) have historically been more supportive of India’s relations with the Jewish nation, let’s not forget that it was a non-BJP prime minister, P.V. Narasimha Rao, who established diplomatic ties, and also that bilateral ties continued to grow apace even during this past decade of Congress rule.
Similarly, while Modi deserves full credit for going public with India’s de-hyphenation of its Israel and Palestine policies (and taking the related course-correction measures such as rethinking India’s voting choices on anti-Israel resolutions at the UN and dropping the demand for East Jerusalem as capital of a future Palestinian state), the fact remains that in private this de-hyphenation had already taken place.
In effect then when Modi landed in Jerusalem on Tuesday, he did not necessarily start a new chapter in India-Israel relations but took the one that was opened 25 years ago to its logical conclusion. And while that is a fine thing in itself, for the visit to be truly substantive, it is the roadmap for the future that will hold the key.
In particular, two issues deserve attention.
The first is trade. From just $200 million in 1992, bilateral trade (excluding defence) peaked at about $5 billion in 2012 but since then it has dropped to about $4 billion—which is a pittance compared to both India and Israel’s trade numbers with other countries in the region. Also, bilateral trade has not diversified much—diamonds and chemicals still make up for the large chunk of the pie just as they did in previous years; high-tech is only a small part of the deal. Sure, a few Israeli companies such as Teva Pharmaceuticals, Truphatek, Netafim and Amdocs have big offices, factories or subsidiaries in India, but their numbers pale in comparison to the Israeli presence in the West.
One big reason why India-Israel trade has in fact stagnated is that the Israeli private sector has struggled to find its feet in India. No doubt, India can be a tough market to crack but Israeli businesses, particularly small and medium enterprises, mostly remain focused on the Western markets that they are familiar with and for which their products are designed. This also means that those same products are not always well-suited for the price-sensitive Indian market. Costs can be reduced by leveraging the large Indian market and deploying the economies of scale but this isn’t an Israeli strongpoint and Indians haven’t been able to fill the gap either.
This problem with scaling up technology is also evident in the agriculture sector—one of the core areas of bilateral cooperation. Take, for example, the numerous Israeli “centres of excellence” that showcase Israeli agricultural expertise and provide know-how to Indian farmers across India: as individual units they are a huge success, but they are not viable businesses yet.
From the Indian side, there have been only a few major investments in Israel—for example, in 2013, Tata became the lead investor in the $20 million innovation fund at Ramot, the technology transfer company of Tel Aviv University; last year, it also helped set up a new technology incubator; Mahindra, Wipro, Sun Pharma, Reliance Industries and Infosys have also made investments in Israel, but there’s still a long way to go. The Israeli market is too small for most Indian small and medium enterprises, though the big conglomerates stand to gain significantly from investments in research and development.
A third factor for the lukewarm business ties is cultural difference: Israelis and Indian approach business differently and often find it difficult to get on the same page. Finding the right business partner can be tough, and connections between the business elites of the two countries aren’t particularly strong. This sort of feeds into the larger problem of inadequate people-to-people ties between the two countries—which is the second issue that deserves attention.
Simply put, Indians and Israelis don’t know enough about each other. For the vast majority of Indians, Israel is a war-ravaged country that’s located somewhere in the Middle East; for a few others, Israel is this mythic military power, slaying the demon of Islamist terror. From the Israeli side, again, India doesn’t feature on its mental map of the world, and when it does, it is usually as an exotic holiday destination.
Investments to boost tourism, education and cultural ties and building bridges with the Indian diaspora in Israel can help significantly in this context. Indeed, these are the low-hanging fruits in the bilateral relationship that can be plucked right away.
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