India to launch trade talks with Israel

India is to launch negotiations to strike a bilateral trade agreement with Israel in what is one of the most tangible symbols of the fast-warming relations between the two countries.

Rahul Khullar, India’s commerce secretary, said that India was prioritising a deal with Israel from among a list of about 20 countries lined up seeking improved bilateral trade ties with one of the world’s fastest growing large economies.
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“I’ve just had authorisation to open up negotiations with Israel and New Zealand,” Mr Khullar told the Financial Times.

India, which has traditionally taken a leadership position in the Non-Aligned Movement and held deep sympathies with the Palestinian cause, only opened formal diplomatic relations with Israel in 1992.

Bilateral trade between India and Israel has risen quickly to an estimated $4.1bn in 2008, excluding a growing defence trade. A more formal agreement would give India’s manufacturing industries greater access to Israel’s high technology sector, while Israel would benefit from better trade and investment prospects in India’s large, fast growing domestic market of 1.2bn people.

An Israeli official said an agreement had been “under discussion for quite some time” but said that Tel Aviv was yet to receive official notification of New Delhi's intentions to advance negotiations. He predicted that bilateral trade could rise to $12bn within five years once a pact was in place. Among other areas, Israel has agricultural technology that would assist Indian farmers in boosting their productivity and has strong ties with India's diamond industry.

Trade negotiations with India are a big step for Israel, which has pushed for high profile official recognition from India, the world’s largest democracy. Israel already has FTAs with the US, European Union, Canada and Jordan.

India, Asia’s third largest economy, has signed two similar agreements, with the Association of South-East Asian Nations regional grouping and South Korea. New Delhi is currently negotiating trade deals with the EU and Japan. Indian officials have surprised trade negotiators by putting ambitious timetables to achieve notoriously complicated and prolonged arrangements.

“Japan and Europe are next,” said Mr Khullar. “My guess is Europe will come first and Japan a little later. Both are clear prospects for this year. [Negotiations with] Canada will kick off by summer”.

New Zealand confirmed that talks with India will begin shortly. Coal is the dominant product in the two country’s NZ$1bn annual trade.

The European Commission has urged New Delhi to get into the details of “a give and take process”, saying the political will to strike a deal after seven rounds of talks was now in place. Negotiations were dragging over disagreements surrounding intellectual property.

Mr Khullar, however, expressed frustration that New Delhi did not have the resources to engage in multiple negotiations with trading partners, saying that the staff headcount in the commerce department had been “frozen” for 30 years.

“We are latecomers to this bilateral type of race,” he said. “We just don’t have the resources to commit - the manpower resources.”

The decision to proceed with more bilateral trade agreements comes in the absence of progress towards concluding the World Trade Organisation’s Doha round of talks and fears of rising protectionism in the US as the Obama administration pursues job creation.

It also comes as New Delhi feels increasingly confident about the strength of the Indian economy when markets in the west remain depressed. Official figures estimate economic growth of 7.2 per cent this year.