Diplomatic rifts between India and Canada are casting a shadow over their trade and investment ties, raising concerns within the business community. Recent allegations by Canadian Prime Minister Justin Trudeau have only exacerbated the situation.
Trudeau’s startling claim of “credible allegations” linking the Indian government to the assassination of a Khalistani terrorist, Hardeep Singh Nijjar, has sent shockwaves through the diplomatic corridors. Canada’s subsequent expulsion of a senior Indian diplomat in response to these allegations has only added fuel to the fire. India has vehemently refuted these allegations, dismissing them as “absurd” and urging Canada to address anti-India elements within its borders.
The Ministry of External Affairs (MEA) wasted no time in summoning Canadian High Commissioner, Cameron MacKay, to communicate India’s decision to expel the implicated Canadian diplomat stationed in India. This move underscores India’s commitment to defending its national interests.
In a surprising turn of events, Canada recently halted discussions on a proposed treaty with India, just three months after both nations expressed their intent to finalize an initial agreement this year. The Comprehensive Economic Partnership Agreement (CEPA) between Canada and India held the promise of enhancing bilateral trade by up to $6.5 billion, with potential GDP gains estimated between $3.8 billion to $5.9 billion for Canada by 2035.
Trade between the two nations has been steadily growing, with goods worth $8 billion exchanged in 2022. India exported goods valued at $4 billion to Canada during this period, while importing an equivalent amount. Canada’s agricultural sector, particularly lentil producers, has profited from India’s growing demand. Meanwhile, Indian pharmaceutical and software companies have expanded their presence in Canada.
Canada ranks as the 17th largest foreign investor in India, having poured over $3.6 billion into Indian ventures since 2000. Notably, Canadian portfolio investors have made substantial commitments in Indian stock and debt markets, tallying billions of dollars. CPP, the Canadian pension fund, stands out with approximately $15 billion invested in various sectors like real estate, renewable energy, and finance.
India hosts over 600 Canadian companies, including industry giants like Bombardier and SNC Lavalin. Conversely, more than 30 major Indian corporations, such as TCS, Infosys, and Wipro, have made significant investments in Canada, generating employment opportunities in both countries.
India has been a major source of international students for Canada since 2018, with nearly 320,000 Indian students studying there in 2022. This influx has enabled Canadian institutions to offer subsidized education to their domestic students. However, deteriorating relations could disrupt this flow.
Additionally, tensions could affect the economic interests of Sikh families in India, as many have relatives in Canada who send substantial remittances back home, contributing millions to India’s economy. According to Canada’s 2021 census, the Sikh population in Canada has more than doubled in the past two decades.
The Outlook
As diplomatic strains continue, the future of India-Canada trade and investment hangs in the balance, with businesses and stakeholders anxiously awaiting a resolution to these challenging times.
