A Boom in Israel's Exports to India

As India's economy expands, business ties between the two nations are deepening and sales are surging

by Neal Sandler

Indian Defense Minister A. K. Antony looks at a model of a tank during the inauguration of the international DefExpo 2008 defense fair, in New Delhi on Feb.16, 2008. RAVEENDRAN/AFP/Getty Images

There have been Jews in India for centuries, and Indians in Israel for decades. But it wasn't until 1992 that the two countries established diplomatic relations. Now, as India's economy grows, business ties between the nations are deepening, and exports from Israel to the world's second-most-populous country are soaring.

Consider Tel Aviv's Netafim, a leading supplier of drip irrigation systems. From fewer than 100 employees in India just four years ago, the company now has expanded its staff there to more than 700 and on Aug. 23 opened a second factory in the southern city of Chennai. Even more remarkably, Netafim bases its global engineering and planning operations on the subcontinent.

"India has become our second-largest market (after the U.S.) and continues to grow rapidly," says Ofer Bloch, Netafim's president and chief executive. The privately held company, owned by three kibbutzim and two equity firms, notched sales of nearly $500 million last year and aims to double its revenues by 2011, thanks in no small part to growth in India.

Makers of everything from chemicals to software are seeing similar surges. All told, exports of nonmilitary goods and services from Israel to India jumped 40% in the first half of 2008 from the same period the year before, after reaching a record $1.6 billion for 2007 as a whole.

Military business also is booming. Although official figures aren't released on a country-by-country basis, a senior Israeli defense industry source estimates that Indian purchases now account for about one-third, or $1.67 billion, of Israel's $5 billion in annual defense exports. That brings Israel's total estimated civilian and military sales in India to around $3.27 billion.

Farming Out High-Tech Work

All manner of companies are benefiting from the trend. Giant Israel Chemicals (ICL.TA), for instance, figures that in the first half of this year it has already surpassed the $263 million in revenues it booked from India for all of 2007. Growing sales and a sharp rise in potash prices have made the specialty chemicals and fertilizer manufacturer into one of Israel's leading players in India. Meanwhile, Kadima-based IDE Technologies, a top supplier of desalination technology and systems (BusinessWeek.com, 4/25/08), is helping address critical water shortages on the subcontinent. "Our sales to India have more than doubled in the past few years, to the level of $50 million to $100 million," says Henri Inzelberg, vice-president for global marketing.

Israel's high-tech industry also has discovered India in a big way. Initially, big companies such as billing software developer Amdocs (DOX) and tech integrator Ness Technologies (NSTC) turned to India for cheap engineering talent. Now, faced with manpower shortages in Israel and a rising shekel, even startups are farming out work to India to lower their development costs (BusinessWeek.com, 7/23/08).

But these days, with sales on the upswing in the Indian market, outsourcing is only part of the equation. Tel Aviv security-software maker Aladdin Knowledge Systems (ALDN) opened an office last year in Mumbai and is already looking to expand its presence there. "We see India as a huge opportunity rather than a threat since there is a big demand for our type of security products," says Jacob (Yanki) Margalit, chairman and CEO of Aladdin.