Israel-Hamas conflict: Indian exporters may see higher costs

11 Oct 2023 CW Team

According to analysts, Indian exporters exporting goods to Israel may suffer higher insurance premiums and delivery expenses as a result of the Israel-Hamas conflict.

Israel faced an unexpected and unprecedented multifront offensive by the Hamas militant group, which administers the Gaza Strip, in its southern sections.

According to international trade experts, the conflict will diminish domestic exporters' profits but have no effect on trade volumes unless the war develops.

""For merchandise exports of India, the war may lead to higher insurance premiums and shipping costs. India's ECGC may charge higher risk premiums from Indian firms exporting to Israel,"" think tank Global Trade Research Initiative (GTRI) said.

The government of India owns 100% of ECGC Ltd (previously Export Credit Guarantee Corporation of India Ltd). It was founded in 1957 with the goal of increasing domestic exports by offering credit risk insurance and export-related services.

Sharad Kumar Saraf, founder chairman of Technocraft Industries India and a Mumbai-based exporter, believes the crisis will have an immediate impact for Indian exporters.

""But if the war escalates, things may get bitter for our exporters of that region,"" Saraf said.

GTRI co-founder Ajay Srivastava believes that if operations at Israel's three main ports, Haifa, Ashdod, and Eilat, are affected, trade will suffer significantly.

Agricultural products, chemicals, electronics, machinery, and cars are all shipped through these ports.

India's merchandise trade with Israel is primarily conducted through the Red Sea port of Eilat.

""Fortunately, so far there is no report of port disruption. India-Israel bilateral services trade is estimated to be around $ 1.3 billion. It may have no impact unless war escalates to involve bigger parts of Israel. The real impact would depend on the duration and intensity of the war,"" Srivastava said.

In 2022-2023, India-Israel commerce in goods and services is expected to be worth $ 12 billion. During 2022-23, India's merchandise exports and imports from Israel were $ 8.4 billion and $ 2.3 billion, respectively, resulting in a $ 6.1 billion merchandise trade surplus.

Diesel ($5.5 billion) and cut and polished diamonds ($1.2 billion) are India's two most important exports to Israel. Rough diamonds ($ 519 million) and cut and polished diamonds ($ 220 million) are the most important imports, followed by electronics and telecom components such as ICs and photovoltaic cell parts ($ 411 million), potassium chloride ($ 105 million), and herbicide ($ 6 million).

India exports to Israel a diverse range of IT services, including software development, IT consulting, and data processing. Both countries work closely on R&D in agriculture, water technology, and renewable energy.

As Israel is a leader in medical innovation, Indian hospitals import medical equipment and technology from Israel, and Israeli companies invest in Indian healthcare startups. Both nations are also negotiating a free trade agreement.

Indian companies like Sun Pharma, Tata Consultancy Services, Wipro, Tech Mahindra, State Bank of India, Larsen & Toubro, and Infosys have their presence in Israel.

Israeli companies have invested in India in renewable energy, real estate, and water technologies and are also setting up R&D centres and production units in India. Israeli firms have invested (FDI) $ 286 million in India between April 2000 and June 2023.

According to analysts, Indian exporters exporting goods to Israel may suffer higher insurance premiums and delivery expenses as a result of the Israel-Hamas conflict.Israel faced an unexpected and unprecedented multifront offensive by the Hamas militant group, which administers the Gaza Strip, in its southern sections.According to international trade experts, the conflict will diminish domestic exporters' profits but have no effect on trade volumes unless the war develops.For merchandise exports of India, the war may lead to higher insurance premiums and shipping costs. India's ECGC may charge higher risk premiums from Indian firms exporting to Israel, think tank Global Trade Research Initiative (GTRI) said.The government of India owns 100% of ECGC Ltd (previously Export Credit Guarantee Corporation of India Ltd). It was founded in 1957 with the goal of increasing domestic exports by offering credit risk insurance and export-related services.Sharad Kumar Saraf, founder chairman of Technocraft Industries India and a Mumbai-based exporter, believes the crisis will have an immediate impact for Indian exporters.But if the war escalates, things may get bitter for our exporters of that region, Saraf said.GTRI co-founder Ajay Srivastava believes that if operations at Israel's three main ports, Haifa, Ashdod, and Eilat, are affected, trade will suffer significantly.Agricultural products, chemicals, electronics, machinery, and cars are all shipped through these ports.India's merchandise trade with Israel is primarily conducted through the Red Sea port of Eilat.Fortunately, so far there is no report of port disruption. India-Israel bilateral services trade is estimated to be around $ 1.3 billion. It may have no impact unless war escalates to involve bigger parts of Israel. The real impact would depend on the duration and intensity of the war, Srivastava said.In 2022-2023, India-Israel commerce in goods and services is expected to be worth $ 12 billion. During 2022-23, India's merchandise exports and imports from Israel were $ 8.4 billion and $ 2.3 billion, respectively, resulting in a $ 6.1 billion merchandise trade surplus.Diesel ($5.5 billion) and cut and polished diamonds ($1.2 billion) are India's two most important exports to Israel. Rough diamonds ($ 519 million) and cut and polished diamonds ($ 220 million) are the most important imports, followed by electronics and telecom components such as ICs and photovoltaic cell parts ($ 411 million), potassium chloride ($ 105 million), and herbicide ($ 6 million).India exports to Israel a diverse range of IT services, including software development, IT consulting, and data processing. Both countries work closely on R&D in agriculture, water technology, and renewable energy.As Israel is a leader in medical innovation, Indian hospitals import medical equipment and technology from Israel, and Israeli companies invest in Indian healthcare startups. Both nations are also negotiating a free trade agreement.Indian companies like Sun Pharma, Tata Consultancy Services, Wipro, Tech Mahindra, State Bank of India, Larsen & Toubro, and Infosys have their presence in Israel.Israeli companies have invested in India in renewable energy, real estate, and water technologies and are also setting up R&D centres and production units in India. Israeli firms have invested (FDI) $ 286 million in India between April 2000 and June 2023.

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