NEW DELHI
:
Talks between India and Israel on a free trade agreement have hit the skids due to hurdles posed by the ongoing conflict in West Asia, according to two people aware of the matter.
The conflict, which began after the militant group Hamas launched a terror attack on Israel on 7 October, has consumed much of the focus of India-Israel ties, one of them said.
“It (the conflict) has become a major obstacle to the regular pace of talks (on free trade agreement) between the negotiating teams,” this person added.
A normalcy in the FTA negotiations between Israel and India is expected after a de-escalation and resolution of the conflict, said the second person mentioned above. Both of them spoke on condition of anonymity.
Spokespersons for the external affairs and commerce ministries and Israel’s embassy in India didn’t immediately respond to emailed queries.
Talks between Israel and India on an FTA began in 2010. As many as eight rounds of negotiations have been held between both sides since then. However, the talks have stalled recently.
In May 2023, during his visit to India, Israel’s foreign minister Eli Cohen said an FTA was essential to strengthen the economic relations between both countries.
He said his government was pushing for an FTA with India to boost bilateral trade volumes between the nations.
“The scope for trade opportunities between our countries is huge and there is a strong desire to finalise an FTA that hopefully will further strengthen our economic ties,” Cohen had said.
Bilateral trade between India and Israel was estimated at about $12 billion in FY23.
India’s key exports to Israel include cut and unpolished diamonds, electronics and telecom components, and diesel.
Major imports from Israel include pearls and precious stones, chemical and mineral or fertilizer products, machinery and electrical equipment, petroleum oils, defence, machinery and transport equipment.
According to data from the commerce ministry’s NIRYAT portal, India’s total export to Israel between April and November last year stood at $3.51 billion, lower than the $4.54 billion registered during the same period in the year prior.
FTA talks between Israel and India were marred by several challenges even before the ongoing conflict began in West Asia.
In July, Mint reported that FTA talks between the two countries had been stalled due to certain issues, including the movement of Indian IT professionals to Israel.
Further, the Indian side has had concerns that Israel was likely to gain far more from an FTA given the mismatch in the sizes of the two economies.
India is currently the world’s fastest-growing major economy.
The International Monetary Fund expects India’s economy to grow at 6.3% in FY2024, while Israel is expected to clock a 3% growth during the same period.
Meanwhile, Israel’s military campaign in Gaza has created challenges for India. Diplomatically, India has had to balance its relationship between Israel and its partners in the Arab world.
The ongoing crisis can also affect ambitious connectivity initiatives such as the India Middle East Economic Corridor, which is meant to connect India to the Middle East and beyond to Europe.
Meanwhile, attacks on global shipping by Yemen’s Houthi militants, as retaliation to Israel’s military actions in Gaza, have also jeopardised vital Red Sea trade routes.