The bazaar that got bigger

When Pakistan-backed intruders occupied vantage positions on the icy heights of Kargil in 1999, Indian forces swiftly launched a fierce operation to beat them back. It wasn’t easy, but what proved critical in the conflict was a shipment of Israeli drones for high-altitude surveillance which provided more precise imagery for troops and fighter jets. India and Israel might have established formal diplomatic ties just 25 years ago, but with recent contracts worth $2 billion (Rs 12,634 crore), Tel Aviv is already set to become India’s biggest weapons supplier, ahead of the U.S. and old ally Russia.

However, an Israeli foreign ministry representative in Tel Aviv, who did not want to be identified, says that’s not enough anymore. The West Asian country wants to expand its portfolio of businesses with India to a much wider range of sectors from technology to agriculture and pharmaceuticals. Not surprisingly, when Prime Minister Narendra Modi visits Israel in July—the first Indian head of government to do so—defence ties won’t be the only issue on the table. “Doing business other than defence makes Israel look good. It shows the world community that it is getting support from the world’s biggest democracy,” says Abhijit Iyer-Mitra, senior fellow at the Institute of Peace and Conflict Studies and a veteran Israel watcher. “Defence deals can sometimes be tricky. A move in other kinds of business deals helps both countries.”

Trade between the two countries has already grown from $200 million in 1992 to more than $6 billion today. But what is less appreciated is the increasing depth of business ties between the two countries in areas ranging from startup accelerators and technology funding to irrigation technology. At the moment, technology accounts for just 5% of trade between the two countries, but is rapidly growing into one of the biggest areas of cooperation between Israel and India. “Israel is known as the ‘startup nation’ and India, too, is increasingly becoming known as a startup nation—the potential is enormous,” says Anat Bernstein-Reich, chairperson of the Israel-India Chamber of Commerce.

On their part, Indian companies have already begun exploring opportunities in Israel. The Tata Group has joined the likes of Intel, Microsoft, IBM, Google, HP, and Yahoo in a fund to set up an R&D facility in Israel. The group has invested $5 million in a new Tel Aviv University (TAU) technology fund at the Ramot technology transfer centre. It is also an investor in Pitango Venture Capital, the nearly $2 billion venture capital fund run by Chemi Peres, the son of former Israeli president Shimon Peres. Last year, India’s third-largest tech player, Wipro, made an undisclosed investment in the $115 million Israeli venture capital fund, TLV Partners, which specialises in cybersecurity. And T-Hub, a start-up incubator of the Telangana government, signed a pact with the Tel Aviv University Entrepreneurship Center to jointly build accelerators in India and Israel focussed on agri-tech.

India can certainly benefit from Israel’s expertise in technology. The West Asian country has grown into a high-tech superpower over the past few years and is often dubbed a “startup nation” because it has over 2,000 startups, most of them in the technology sector. It has the highest concentration of high-tech companies outside Silicon Valley, and tech giants like Google, Facebook, Microsoft, Intel, HP, and Cisco have their biggest R&D centres outside the U.S. in Israel. High-tech sectors such as cybersecurity, financial technology, robotics, and artificial intelligence employ 10% of Israel’s workforce and account for more than 50% of its exports.

“Israeli entrepreneurs are always sniffing for the next big opportunity and we look beyond apparent hurdles to find them,” says Uzi Scheffer, COO and general manager Israel of SOSA (South of Salame), one of Israel’s most successful startup accelerators.

It’s hardly surprising then that some Israeli companies are scouting for opportunities in India. When SOSA was thinking of expanding its network—New York is its only branch outside Israel—it zeroed in on Mumbai. Despite being cautioned about infrastructure problems in India, Scheffer wasn’t deterred. The accelerator, which has mentored 2,500 startups and has $10 billion in funds under management, wanted to set up shop in India’s financial capital and also found partners there. What excites SOSA about India is the cost-effective nature of its startup industry compared with the U.S. or most of the Western world. SOSA also wants to be in major growing economies where the language barrier is low. Scheffer says Mumbai’s disadvantages, such as its notorious traffic and flooding during the monsoon, do not scare him. “Indian entrepreneurs seem to thrive in difficult situations and Israeli business is not afraid of adversity either.”

SOSA is following in the footsteps of Israeli firms such as irrigation specialist Netafim, which has been in India for 20 years. The company’s wholly owned subsidiary, Netafim Irrigation India, provides irrigation and drip irrigation systems to 2 million acres across India. Netafim India is building the world’s largest drip irrigation project, which includes an automated water pipeline network to drip-irrigate about 29,000 acres in Karnataka’s Bagalkot. Naty Barak, chief sustainability officer of Netafim, an $800 million irrigation systems company based in the southern Israeli settlement of Hatzerim, says helping save water in water-scarce regions is as critical a partnership as providing defence supplies. “The one-sided view of the Israel-India relationship is moving swiftly to a multilateral partnership. The scale is changing completely,” he says.

The world’s biggest generic drugs manufacturer, Teva Pharmaceuticals, is also going big on India. The only Fortune 500 company headquartered in Israel, Teva started operations in India in 2006 and has six factories here. In one of the largest office-space deals in India, the company signed up for 125,000 sq. ft. in Mumbai last year for its new India headquarters. “India has unique opportunities that can be serviced by Israeli companies. We have natural synergies,” says Teva’s head of government affairs and public policy (growth markets), Mati Gill.

An appropriate example of such “natural synergies” is the mango. India might be one of the world’s biggest mango producers, but having made giant strides in mango cultivation, Israel is now helping India increase yields. That’s one sweet deal.