In the latest episode of the State of the Economy podcast, Amiti Sen talks to Ajay Srivastava, former Indian Trade Service officer and Founder, Global Trade Research Initiative, to understand the recent conflict between Hamas and Israel and its potential economic implications for India. The discussion centres on India’s trade relations with Israel and the uncertainties arising from the ongoing crisis.
Srivatsava offers his expertise to provide insights into India’s trade ties with Israel and the potential economic consequences of the ongoing conflict. Srivatsava clarifies that Israel is not a major trade partner for India, with the total trade volume amounting to $12 billion, representing a mere 0.75 per cent of India’s total trade. He elaborates on India’s exports to Israel, which predominantly consist of diesel and cut and polished diamonds, explaining that these two products make up 80 per cent of India’s exports to Israel.
He predicts that the ongoing conflict is unlikely to have a significant economic impact, primarily causing increased shipping and insurance costs and primarily affecting the diamond trade.
The discussion then delves into the possibility of rising insurance costs and government intervention, with Srivatsava explaining that decisions regarding insurance costs are typically made by the Export Credit Guarantee Corporation (ECGC). While the government is not expected to intervene extensively, any potential cost-sharing discussions may occur between diamond traders and the government. The podcast further explores the potential impact on Indian companies and the country’s arms trade with Israel. Srivatsava suggests that Indian intelligence must remain vigilant, given the potential for copycat attempts globally.
The discussion also touches on the India-Middle East-Europe economic corridor, suggesting that the current conflict could disrupt the normalisation process between Saudi Arabia and Israel, which was a foundation for the corridor. However, it remains uncertain at this stage.
In conclusion, the podcast addresses how Indian exporters and importers can deal with the uncertainty that lies ahead. Srivatsava believes that for India, which primarily exports diesel and diamonds to Israel, there is not much to worry about at this stage other than potential increased insurance and shipping costs. He maintains that the situation may evolve if the conflict escalates, but, for now, the impact on India’s trade with Israel appears limited.