Recent skirmishes between Israel and Hamas could escalate costs for Indian exporters shipping to Israel. Industry experts anticipate increased insurance premiums and shipping expenses in light of the conflict.
Last Saturday, Israel faced an unexpected assault on multiple fronts from Hamas, which governs the Gaza Strip. This intricate attack, encompassing land, air, and sea, has raised concerns among trade circles about its potential impact.
While current confrontations might dent profits for Indian exporters, overall trade volumes are expected to remain consistent unless the situation amplifies, according to international trade analysts.
The Global Trade Research Initiative (GTRI) recently shed light on these potential financial implications. “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,” GTRI remarked.
Established to bolster India’s exports, ECGC Ltd (previously the Export Credit Guarantee Corporation of India Ltd) is governed by India and provides credit risk insurance and associated services.
Sharad Kumar Saraf, of Mumbai’s Technocraft Industries India, projects near-term challenges for Indian exporters. “But if the war escalates, things may get bitter for our exporters of that region,” Saraf notes.
Ajay Srivastava, co-founder of GTRI, voiced concerns regarding potential trade disruptions, especially if Israel’s major ports, such as Haifa, Ashdod, and crucially Eilat which is a significant conduit for India-Israel trade, experience interruptions.
While no port disturbances have been reported as of now, Srivastava states, 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.”
In the fiscal year 2022-2023, trade between India and Israel across all sectors amounted to an estimated $12 billion. India reported a trade surplus of $6.1 billion, with exports and imports valued at $8.4 billion and $2.3 billion, respectively.
The two nations share robust trading ties spanning diverse sectors from diesel, diamonds, and electronics to collaborative ventures in IT, R&D, agriculture, and renewable energy.
Bilateral relationships are further deepened by tourism and mutual investments. For instance, notable Indian corporations such as Sun Pharma, Tata Consultancy Services, and Larsen & Toubro operate in Israel. On the flip side, Israeli firms have invested a total of $286 million in India from April 2000 to June 2023.
Given the intricacies and depth of the India-Israel trade relationship, any disruption due to the current conflict could have broad implications for both nations.
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