Israel-Hamas conflict: Impact on Indian farming and exports
The Israel-Hamas (Palestine) conflict, ongoing for over 17 years, has escalated in the past week, resulting in significant casualties on both sides. This escalation has disrupted the flow of goods, complicating the supply chain between the two nations, with a devastating impact on Israel’s agriculture community and related industries. India, a major trading partner of Israel, primarily deals in non-agricultural products and its domestic agriculture and related exports are less likely to be impacted by the ongoing conflict.
The conflict
The Israel-Hamas conflict, which has been going on since 2006 when Hamas took control of the Gaza Strip, worsened in October 2023. It escalated when militants attempted to invade Israel on October 7th, prompting Israel to respond with a declaration of war and complete seizure of Gaza.
Effect on food security
Agricultural Sector’s Minor Role in Israel’s Economy (as of 2020): Israel’s population has steadily grown by approximately two per annually over the past decade. However, the agricultural sector’s contribution to GDP decreased from 1.1 per cent in 2020 to 0.9 per cent of total employment in 2021. The economy heavily relies on imports for major agricultural commodities like cereals and oilseeds.
Israel’s Transition from an Agrarian Economy to an Agro-Tech Hub: Challenges such as depleting natural water resources and labor shortage led to the emergence of numerous technology firms. Israel is renowned for its contributions to the world, particularly advanced irrigation and water management technologies such as water desalination, drip irrigation, hydroponics, and robotic farming. Israel was slated to host Agritech 2023, a global summit in Tel-Aviv scheduled for October 17–18, but it has been indefinitely postponed.
Effect on global supply chain
Israel plays a moderate role in global trade: Israel ranked 50th in global merchandise exports and 43rd in imports, contributing only 0.3 per cent and 0.4 per cent to the world’s exports and imports, respectively. Haifa, Ashdod, and Eilat seaports, managed by Israel Ports Development & Assets Company Ltd., handle over 99 per cent of the country’s trade. In 2021, Israel was 42nd in container port traffic according to the World Bank. Although Haifa Port, operated by India’s Adani Group, is globally low-ranked, it remains operational while the conflict affects southern ports near Gaza. Maritime experts continually monitor the situation until tensions ease.
Israel’s vital role as Palestine’s largest trading partner (2021 Data): Israel accounted for 86 per cent of Palestine’s exports and 53 per cent of imports, with Palestine’s 2021 exports at $1.4 billion and imports at $ 7.8 billion. The economy of Palestine depends largely on agriculture, especially for exports. In 2021, nearly 100 per cent of cereals and 76 per cent of vegetables (by value) exported by Palestine went to Israel. Other trade partners include Europe, the Middle East, and North Africa, all facing challenges as the maritime industry becomes cautious due to heightened risks at Gaza Port, Palestine’s sole sea gateway.
Palestine is highly dependent on Israel for agri imports, with 45 per cent of cereals, 86 per cent of fruits, and 52 per cent of vegetables imported from Israel (by value). India, the largest rice exporter, accounted for 22 per cent of cereal imports. However, its contribution to fruit and vegetables imports in Palestine is less than 1 per cent.
Israel’s trade balance and focus on non-agricultural products: In 2021, Israel’s total exports reached $73.6 billion while imports amounted to $107.1 billion. The majority of exports, exceeding 90 per cent, consist of non-agricultural products like fuel, diamonds, and pharmaceuticals. Agricultural exports represent a minor portion, primarily comprising fruits (~54 per cent) and vegetables (~ 20 per cent).
Some of the key agricultural produce exported by Israel are potatoes, carrots, avocados, and citrus fruits. Key export destinations, such as European countries, are likely to experience the impact of the ongoing conflict, resulting in restricted food supply from Israel. This situation potentially creates opportunities for the Indian agricultural sector to prepare for increased demand from European countries.
Israel is a net importer of fresh produce and exports; India plays a minor role as cereal and oilseed supplier: To meet the needs of the growing population, imports have grown two per cent annually to make up over 50 per cent of the country’s total agricultural produce supply. Key agricultural imports include cereals (~26 per cent) and oilseeds (~10 per cent).
Most agricultural products are imported from European countries and India plays a minor role in the supply. Additionally, considering exports from India, Israel ranks 36th for cereals and 21st for oilseeds. India primarily exports these products to Asia, Europe, and North America.
Deep Israel-India Agriculture Relationship
India’s relationship with Israel in technology and trade: India’s ties with Israel are deeply rooted in technology exchange and trade. Their diplomatic relationship, established in 1992, has led to extensive cooperation. Israel has established 30 Centers of Excellence throughout India to enhance agricultural yields and productivity. Several public and private partnerships exist between Indian agribusiness firms and their Israeli counterparts, resulting in pilot projects within the smart farming sector. Some notable collaborations are mentioned below:
- Garuda Aerospace’s memorandum of understanding with Israel’s Elbit Systems for development of drones for village geography mapping
- SMV Jaipuria Group’s 50:50 joint venture with Israel’s Watergen to manufacture and export atmospheric water generators from India
India’s positive export relationship with Israel and agri sector resilience
India maintains a net positive export relationship with Israel. Major exports to Israel include petrochemical derivatives (such as diesel and chemicals), pharmaceuticals, and various industrial equipment. While certain Indian sectors, like diamonds and aircraft technologies, are partially dependent on Israeli imports and may witness some impact due to the ongoing conflict, the agriculture sector is less likely to be affected. Anticipated sanctions from the conflict may have limited impact, given Israel’s modest share in India’s agricultural exports.
(The author is senior consultant, Growth Advisory, Aranca)