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INDIA’S TRADE WITH ISRAEL & IRAN

Iran’s attack on Israel earlier this week has sparked tensions in the Middle East and beyond. India, which has friendly ties with both the countries, has expressed “serious concerns” about escalation of hostilities.

An escalation could also worry traders in the region and spook markets. How does India trade with these two countries?

What could be the impact of renewed regional tensions on the Indian economy?

These questions need to be addressed.

INDIA-ISRAEL TRADE

  • Since 1992 (diplomatic relations estd.), trade between two countries has been rising significantly, from around $200 million in 1992 (comprising primarily of diamonds), to $10.7 billion (excluding defence) in 2022-23.
  • A sharp rise has happened in the last four years, when trade doubled — from $5.56 billion in 2018-19 to $10.7 billion in 2022-23.
    • Between 2021-22 and 2022-23, trade increased by 90 per cent — from $7.87 billion to $10.77 billion.
    • In 2022-23, India’s exports to Israel were worth $8.45 billion, while New Delhi’s imports from Israel stood at $2.3 billion, leaving a trade surplus of $6.13 billion in India’s favour.
  • In FY 2023-24, the bilateral trade reached $5.75 billion during the first 10 months (April-January).

INDIA-IRAN TRADE

  • In 2022-23, Iran was India’s 59th biggest trading partner, with bilateral trade reaching $2.33 billion.
  • India’s trade with Iran has seen a contraction in recent years, before an uptick in the FY 2022-23. It increased by 21.77 per cent — from $1.94 billion in 2021-22 to $2.33 billion in 2022-23.
  • However, in the three preceding years (2019-20, 2020-21 and 2021-22) it saw a contraction in the range of10 per cent to 72 per cent year-on-year, in the wake of US sanctions on Tehran.
  • Trade with Iran also dwindled from the high of $17 billion in 2018-19 to $4.77 billion in 2019-20, and further to $2.11 billion in 2020-21.
  • In FY 2023-24, the bilateral trade Iran reached $1.52 billion during the first 10 months (April-January).

WHAT ABOUT FDI WRT IRAN & ISRAEL?

FDI WRT ISRAEL

Inward FDI: Israel is not a very significant source of investment for India. The country accounts for just 0.4 per cent of the total FDI inflows between April 2000 and December 2023. FDI from Israel to India stood at just $288 million in this period.

Outward FDI: Cumulative Overseas Direct Investment (ODI) from India to Israel from April 2000 to May 2023, was around US$ 383 million.

FDI WRT IRAN

Inward FDI: The FDI inflows from Iran to Iran were recorded at just $1 million from April 2000 to December 2023.

Outward FDI: As far as investment ties with Iran are concerned, India is developing the first phase of the Shahid Beheshti Port at Chabahar, for improving India’s connectivity and trade ties with the Middle East and Central Asia. India has pledged 85 Million USD investment.

HOW TENSIONS IN MIDDLE EAST IMPACT INDIA’S ECONOMY?

According to the think tank Global Trade Research Initiative (GTRI), there is unlikely to be any rise in petrol prices in India as a result of ongoing tensions in the Middle East.

Although, there could be some impact due to tensions in the Red Sea, which lies at the crucial trade route connecting Europe and Asia.

Roughly 12 percent of global trade is dependent on this route.

The tensions could force projects like the India Middle East-Europe Economic Corridor (IMEC) to remain on paper for a long time.

 

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