Research & Analysis

India and Israel: a tango that is still waiting to happen

Israeli Prime Minister Benjamin Netanyahu has achieved a lot. He took over in 2009 in the midst of a severe economic downturn and has since grown the economy by 50%, adding more than US$110 billion to gross domestic product.

Netanyahu arrived in India on Sunday for a six-day visit. If he is looking to boost ties with India to consolidate his economic record, however, that is simply not going to happen. The India roadshow is all talk and no substance.

The core of the problem lies not on the Israeli side. The Indian side, on the other hand, is where economic and human-resource delusions seem to have taken over the very highest levels of government, there being no separation between private and public assessments of what is achievable and what is not.

On Monday, nine memoranda of understanding were signed between the two governments covering cybersecurity, oil and natural gas, air transport, films, AYUSH (ayurveda, yoga and naturopathy, unani, siddha and homeopathy), space, investment, metal-air batteries, and solar-thermal energy panels. Snickering over the fact that no deals were signed and that these are merely MoUs is misguided. “Deals” during state visits are common only in wealthy authoritarian states like China and Saudi Arabia that can afford to shower their guests with multibillion-dollar orders for such things as Airbus and Boeing aircraft.

Visits to constitutional democracies, on the other hand, do not bring “deals,” unless it is a desperate last-minute deal like New Delhi buying AH-64D helicopters from the US to assuage India fatigue in Washington during the last years of the Barack Obama administration.

What is important here is to assess each of these MoUs on its own merits, and right from the beginning, the incompatibility becomes clear. The MoUs can be divided into three clear categories of problems: Human-resource incompatibility, owing to different economies and human capital; political problems; and finally those that something may come out of but of minimal value addition to either party.

Getting cybersecurity right
Cybersecurity is perhaps the most salient feature of these incompatibilities. Consider one benchmark: smartphones, increasingly the preferred method of doing all things online, especially sensitive stuff like banking. Israel does not really have a market for low-end mobile devices. The market there is heavily in favor of high-end brands, with Samsung, Apple and LG accounting for 80% of the market.

India on the other hand is a heavily fragmented and price-sensitive market – preferring lower-end, highly vulnerable phones. The problem here is, given the Indian government’s focus on delivering last-mile connectivity through technology, how does one secure entry-level equipment and software with top-class security given its importance to the national socio-economic framework? There is a point to be made here that with Chinese brands, what security exists at the vendor/service-provider end can be overcome by malware on the user side.

The other problem with cybersecurity and the evolution of threats in the cybersphere is that the solution does not lie in technology but in people – in human resources and trust in the government. Governmental trust is important to ensure law enforcement and the prevention of industrial-secret leaks that may happen because of threat-information sharing by companies, while large centers of trained problem solvers are critical to fighting attacks as and when they happen.

The problem is that in India, neither are laws enforced when security breaches happen, nor is the government to be trusted with information, and, most important, an education system that focuses on rote learning, squeezing any iota of problem-solving ability out of a student. Where then is the compatibility?

Cooperation on science snd technology
Similarly in space, the Indian Space Research Organization (ISRO), which at one point might have spearheaded the country’s entry into space, is by all private accounts becoming monopolistic in its behavior and the biggest hindrance to the development of an MSME (micro, small and medium-sized enterprises) ecosystem around it.

The importance of such ecosystems is a critical feature of the Israeli economy, where smart MSMEs with significantly lower economies of scale to worry about are at the forefront of innovation. Almost invariably these companies complain bitterly about ISRO in private as given its monopolistic policies, they are unable to find suitable MSME partners in India to make the same template work and develop solutions unique to the Indian market.

This is where metal-air batteries and solar thermal panels also fit in. The lack of MSME depth in India prevents the kind of rapid innovation possible in Israel, and extreme price sensitivity means that Chinese economies of scale will always trump higher-efficiency, longer-life models that India-Israel cooperation may be able to produce if and when the MSME ecosystem issue is overcome.

Equally, the problem with India is one of scant regard for intellectual-property rights, which has severely affected Israeli MSME tech transfers to India in the space sector as well. This refusal to guarantee vendor protection based on the delusion that India can absorb technology, indigenize it, improve it and then export it within a short time frame despite having neither the human capital nor industrial ecosystem to do so creates problems across the board.

With air transport the problem is a political one: Most Muslim countries between India and Iran ban direct flights to Israel. Consequently direct flights from Delhi will either have to fly east over China and take the circuitous northern route, or fly south over the Arabian Sea and into the Red Sea, turning what should be a 4,000-kilometer, five-hour flight into an excruciating 7,000km, eight-hour nightmare, with all the attendant fuel, staffing and weight issues.

This same issue becomes a problem with developing and importing Israeli oil and natural-gas (ONG) reserves. Fortunately, swap agreements being talked about (such as Japan getting access to Indian concessions in Sakhalin and India getting access to Japanese concessions in Qatar) provide a useful way out. The issue is, what can India provide to Israel in terms of technology that US and European ONG giants cannot and in terms of price that China cannot?

On balance, the problems of deeper growth between India and Israel lie almost entirely on the Indian side, and no amount of sentimentality can overcome this. Should India decide to get its act together, Israel could become India’s single most important partner. On the other hand, if India’s voodoo economics, blasé attitude toward fixing deep institutional problems, and severe misdiagnosis and self-delusion continue, then we can always look forward to the AYUSH and film agreements – hoping for Bollywood actress Sonam Kapoor gyrating her pelvis on Herzliya Beach.


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