India-Israel Trade Likely to Withstand Conflict, but Hormuz Strait Poses Major Threat
Heightened Tensions Between Israel and Iran: Implications for India-Israel Trade
The increasing friction between Israel and Iran has sparked worries regarding the future of trade between India and Israel, particularly in the arms and energy sectors. While the overall effect on trade may be restrained, key shipping routes, such as the Strait of Hormuz, face significant risks. The continuing conflict between Israel and Iran could lead to extensive repercussions for trade as well.
Regional Trade Concerns
Beyond the direct implications for Israel and Iran, prolonged tensions could adversely affect trade across the entire region. India has historically maintained amicable relations with both nations, and its trade with Iran amounts to approximately xx billion, while trade with Israel is valued at xx billion.
India’s Export Profile to Israel
India’s principal exports to Israel encompass pearls and precious stones, automotive diesel, chemical and mineral products, machinery, electrical equipment, plastics, textiles, apparel, base metals, transport equipment, and agricultural goods.
Key Imports from Israel
Conversely, major imports from Israel into India include chemical and mineral fertilizers, machinery, electrical equipment, petroleum, defense products, and transport machinery. According to reports, bilateral trade between India and Israel is expected to multiply tenfold in the coming 12 to 13 years, as stated by Commerce and Industry Minister Piyush Goyal.
Trade Growth Statistics
Merchandise trade reached $2.34 billion between April and November, excluding defense, favoring India in terms of the trade balance. Nevertheless, this represents less than 1 percent of India’s total exports. On the flip side, India ranks as Israel’s second-largest trading partner in Asia.
Arms Trade Takes Center Stage
While gems, jewelry, and electrical machinery have traditionally dominated trade, arms and ammunition have shown the most rapid growth over the past decade. A Moneycontrol analysis revealed that the arms trade between the two countries increased by 33 times from 2015 to 2024, despite a decline in Israel’s overall exports to India. In 2024, the arms trade reached $185 million, a substantial rise from merely $5.6 million in 2015, while the record peak occurred in 2023 with $265 million in bilateral weapons trade. Notably, this trade largely consists of Indian imports, as India ranks among the world’s largest arms purchasers.
Impact of Recent Escalation on Trade
Given that Israel constitutes a minor segment of India’s overall trade, amounting to around $3 billion out of $1,160 billion, any fallout from tensions is likely to be minimal for New Delhi. Nonetheless, disruptions to critical maritime routes could have a serious impact. The primary concern lies with the Strait of Hormuz, a crucial passage for nearly 20 percent of global oil shipments, where any blockage could send shockwaves through energy markets. However, it is improbable that Iran will obstruct this key waterway.
India’s Call for Dialogue
India has voiced its concerns regarding the escalating hostilities, advocating for both parties to de-escalate and emphasize the importance of dialogue and diplomacy. The Ministry of External Affairs (MEA) has reiterated India’s commitment to maintaining cordial relations with both Israel and Iran, offering its support to facilitate peaceful resolutions.
