Just how rich is Israel & how it got there with no oil. And yuan reality check for rupee nationalism

foreign [Music] Investments are subject to Market risks read all scheme related documents carefully [Music] is O2 to find work done by my colleagues so this is nikhil rampal our data journalist and also TCA Sharad ragwanar economics editor each one is done a story that that gives me a lead into today's episode of so let me first of all ask you a question a trick question if you ask me which ones do you think are the richest countries in Asia Asia I said richest countries in Asia right you might immediately think of Saudi Arabia Qatar UAE the Big Oil economies right or maybe Singapore the financial capital of Asia and of a lot of the world particularly after the decline of Hong Kong or relative decline of Hong Kong etc etc but does the name of a country called Israel come to your mind then if I told you that Israel in fact today is not only the third richest country in Asia the third richest after Singapore which is basically a one city state with a lot of expats and a kind of financial Capital Singapore then Qatar which which is almost entirely an oil and gas economy Singapore Qatar and then Israel so so you look at this graphic it shows you how Israel is the third richest country in Asia when you say country is richest poorest of where it is where does it belong you always look at per capita incomes otherwise the country with the largest economy will will always be the biggest that is America but no America is the biggest economy not the richest country in the world so if you look at the richest countries in the world in Asia Israel is now number three in the Middle East in the Middle East Israel is now number two after Qatar once again counter intuitive you will say oh how can Israel with not a drop of oil be richer than Saudi Arabia in fact at this point Israel is twice as rich as Saudi Arabia and that's where some bit of the Clutter for today's episode lies that how come a country with almost no natural resources in fact no natural resources except for the Cosmetic salts they might dig out of the out of the Dead Sea right and sell it as Cosmetics they have almost no natural resources and yet that country has now become so rich so if you look at the per capita incomes today Singapore is 91 000 in Asia Qatar is 83.9 000 and Israel is 55 plus thousand in fact if you look at Israel now it is twice as much as Saudi Arabia without any oil it's also several times bigger than its neighbors 11 times bigger than say Jordan with which it is for two Wars 13 times richer than Lebanon but Lebanon is a fading power Lebanon is a lot of other trouble so see what has led to this what has led to this miracle in Israel once again if you want to understand the success of Israel today Israel's per capita income is higher than that of many top European oecd countries so it's higher than that of UK Germany France and so on so how has this miracle happened look at Israel and as I speak you will see some of these Graphics you've already seen the graphic of comparisons of Israel's per capita GDP in Asia but also see where Israelis come from so Israel was a broken economy say until the mid 80s until 1985 Israel used to have sort of Zimbabwean scale or Venezuelan scale inflation rates 450 percent was the peak in 1985 and that's when when I first went to Israel in 1991 I was told oh this is the country that keeps knocking off zeros from the value of their currency that was a shekel right 1985 they had the peak of that inflation Peak inflation really broken economy shortages and a big welfare economy then the politics of the country changed and the economy of the country changed between 1985 and 86 the country carried out a big stabilization plan bankrolled by the Americans under the Reagan Administration and you would expect that Ronald Reagan would then say look carry out economical forms and I will give you money conditional and economic reforms so Israel carried out those economical forms and that led to a massive change immediately so from 450 percent in say 1985 nikhil story tells you I'm sharing a link with you and you're seeing these Graphics as we talked you will see from 1985 from nearly 450 percent it drops to about 20 percent and keeps going down it has come under such tight discipline that for two decades now for more than two decades now Israel's inflation has stayed in single digits and that has made a big difference again public debt to GDP ratio in 1985 had gone to 157 percent as an IMF working paper that nikhil quote from tells us but then again Israelis worked on that how did they do it first of all they cut a lot of their welfare spending they cut a lot of their welfare spending they spent they invested in infrastructure they invested in Human Resources but they cut a lot of their welfare spending second they devalued their currency I know that this is the era of currency nationalism which will feature which is a fact that will feature in the second part of this episode of cut the Clutter that is that draws from TCA Sharad raghwan story so currency nationalism they dropped all notion of currency nationalism they devalued their currency heavily and made their currency more competitive as a result see how Israel's per capita income traveled again if you look at this IMF working paper in 1986 Israel's per capita income very small population even now it's just about load of people it was eight thousand dollars 1996 it had come to twenty thousand dollars and today as I told you it's about 58 000 that is how the country's income levels have changed now what does what does Israel do that has brought about such a change so even in 1996 in the first the first decade of its stabilization program Israel was already spending 2.6 percent of its GDP in research and development how much was that in 1996 if you want to understand that that was more than what the Americans were spending as a percentage of their GDP and you might say oh America's GDP is so large so comparisons don't apply you get China what Israelis were spending on R D in 1996 that is 2.6 percent was already five times already more than five times of what the Chinese were spending in that year right so they were so far ahead of the Chinese already so forward looking and so much so looking in the future so they were making an investment in research science technology high tech today Israel's investment in research and development is 5.6 of their GDP it is the highest in the world and again look at the other side of the figures that tells you the benefit they've drawn from this the benefit they've drawn from this is that their exports of high-tech products have boom so Israel has now become a superpower it showed a superpower in high-tech exports once again what are high-tech exports so if you look at the definition from you and com trade which is the repository of global trade statistics they tell you that high-tech exports or high-tech goods are products with high research and development intensities such as Aerospace computers Pharmaceuticals scientific instruments and electrical Machinery it is these products where Israel's exports have boomed so 2007 Israel's high-tech exports were 3.12 billion dollars that was eight percent of Israel's manufactured goods exports in 2008 next year it went up to 10 billion dollars or 17 percent of Israel's manufacturing exports 2009 to 14 in five years it went up but stayed around 20 percent of 20 share of Israel's total manufactured exports by 2019 it had gone up to 23 percent in 2021 Israel's high-tech exports for about 17 billion dollars worth which makes it one third of all of Israel's exports that is a massive jump and that is where this incomes of the Israelis are coming from now I told you that 5.6 percent of GDP as spending on R D is the highest in the world you might also be curious to know what are the other country spending what what are the other highest Spenders in that field so Usual Suspects South Korea 4.9 percent and Taiwan 3.8 percent so those are the competitors but Israel estate ahead of them in fact as we speak now and as Professor Thomas fedlon of Tel Aviv University quoted by nikhil in the story tells us that Israel today accounts for one-third one-third of all the cyber security exports in the entire world so think Pegasus but it isn't just Pegasus the Israelis ruled the cyber security market now that reminds me of something that Thomas Friedman wrote once he said you Indians should not worry that you don't have so many natural resources that you haven't got oil you haven't got gold you haven't got those resources but you got people you got Human Resources so just as other countries mind their land for minerals Etc you mind the mind of your own people you mine your own people that's precisely what Israel has done so once again lesson for India as well if you want to be a knowledge economy then invest in r d education quality education higher education already the share of high-tech Goods in India's manufactured goods exports is about 10 percent it's not too bad but it could be better but it is possible that some of it is weighed down also by our Pharma exports so I don't know how Tech they are or whether generics are a part of this or not but the fact is that a country like India which sees itself as a big ITN Technology power should be reducing and exporting a lot more of high-tech Goods so that is the lesson from Israel that I think we should learn in India as well and the other issue we talk about is again currency and nationalism so we've talked about this in the past we've talked about the excitement now in some circles you know rupee would not become an international currency that the dollarization is taking place and rupee will not move into some kind of a globally traded currency or they will be a brics currency to which and this is opinion to which my view has been that a brics currency and SEO currency whatever will then be a Yuan based currency it will be chinese-led currency India is not quite ready yet to float the rupee as a global Reserve currency or the currency of global trade because that causes a problem the problem is somebody can buy stuff from India in rupees India can pay somebody in rupees but what will that somebody do with those rupees can that somebody then buy say fighter planes from from America or France with those rupees it doesn't work like that in fact in Practical life that's precisely what's happening right now between India and Russia we've spoken about this in the past and I will share a link of that episode of Qatar clutter with you that that is where Dennis Montero the Russian Deputy Prime Minister and Minister for industry and trade had come to India and yet underlined a problem and he said we just have too many Rupees you are buying this oil from you're paying us in rupees but we don't know what to do with rupee because there isn't that much for us to buy from your country unlike say the case with China with China the Russians have a lot to buy so anything that the Chinese pay in Yuan to them for their oil China and India are the two biggest buyers of Russian oil now anything the Chinese pay in Yuan Russians are able to use to buy more stuff from China but they don't have that much to buy from India in the process because of the increasing trade imbalance between India and Russia given the rising oil imports remember India's oil imports from Russia before the War Began but just 2.47 billion dollars in a year last year 2022-23 these had already come up to 31.12 billion dollars again see this graphic so this is a rise of 1100 percent in one year in fact oil import from Russia or just two percent of India's basket of oil and gas imports from the entire world now it's gone to 19. what's happened in the process is that in 2021-22 whereas in 2020 122 India's trade imbalance so trade deficit with Russia was 6.6 billion dollars in 2022-23 it had come up to 43 billion dollars it's not as if it's adding to India's entire trade deficit it's just that this deficit has been shifted safe from Saudi Arabia or Iraq or the U.S other such countries from where India was buying oil earlier so the overall deficit is netted off against this but deficit with Russia is problematic for India and for Asia for the simple reason that while India can pay Saudi Arabia Iraq the U.S the usual usual suppliers to India or UAE in dollars in dollars or any of the other convertible currencies say the UAE Dirham India cannot pay the Russians in dollar because there are there are sanctions on the dollar so how does India pays and if India pays in rupees those rupees are piling up into a big mountain and Russians don't know what to do with it what so what the Russians have been telling the Indian side is that look we understand the problem and we don't want you fighting with this and that nor do we want you breaking the sanctions but can you pay some of it in a currency that we can use now for some time India was using dirhams to do so but remember Dirham is also a dollar linked currency and there are limitations to what the Russians can buy with the Dirham also because they can't convert it into the dollar while Dirham itself is a dollar link currency so that's why the Russians they haven't pushed for it but they suggested to the Indian side that can you pay us some some of it back in Yuan and lo and behold Reuters had a story on this some time back and then we thought we'll check on it and that's how Sharad ragman's story came and sees Sharad rahman's story on your screen and we found out that about 10 value of our oil purchases from Russia now we are paying back to the Russians in Chinese Yuan where does this Yuan come from I don't know if we are using our dollars to convert this into Yuan that will be tough because that I'm not a hundred percent but that might be seen as a violation of sanctions I'm not a hundred percent on this but the fact also is that officials tell Sharon that since we also export quite a bit to China we have a deficit but we still export quite a bit to China some of that is paid for in Yuan and that yuan is not being used to pay the Russians at least to the equivalent of 10 of all our oil imports so once again it's a reality check on the idea of currency nationalism so it's not as if rupees becoming an international credit currency at rupees not ready yet for that there is still time for that on the other hand because piled up rupee has become such a problem even between two friends like India and Russia so what is the result India is having to lean back on the Yuan the currency of the Chinese never mind never mind our super friendly relations with our Northern neighbor

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Id: 01auN1TprS0

Length: 16min 48sec (1008 seconds)

Published: Fri Jul 07 2023