Does India-canada’s Flaring Tensions Risk Multi-billion Trade, Investment Ties?

On Tuesday, 19 September 2023, India was alleged by the Canadian government that Indian agents are directly linked to the murder of Khalistani movement leader Hardeep Singh Nijjar. But India has commented “absurd and motivated” on the allegation. 

Intelligence agencies of Canada were actively looking for credible links between Indian agents and the murder of the Sikh community leader. Reports say that both countries have expelled diplomats and that has enhanced bilateral tensions. Though India has not yet accepted the allegations, Canada demands Indian assistance in investigations. 

Prime Minister Justin Trudeau, the Canadian Prime Minister, charged ‘credible allegations’ on the Indian government on the murder of the Sikh leader, and the country has expelled one senior Indian diplomat. Within hours, India has called up the Canadian High Commission, Cameron MacKay, and expelled a top Canadian diplomat.

Nijjar was a strong supporter of Khalistan – an independent Sikh homeland and was killed on June 18. Foreign Ministry of India said in a statement that Canada’s allegations on Indian agents are actually a way to shift the focus from Khalistani extremists, who are receiving shelter in Canada and continue to endanger India’s territorial integrity. India said that the Canadian government seems to be inactive on this matter for a long time and will continue to be the same. 

Justin Trudeau, Canadian Prime Minister said, “Canada has declared its deep concerns to the top intelligence and security officials of the Indian government. Any involvement of a foreign government in the killing of a Canadian citizen on Canadian soil is an unacceptable violation of our sovereignty”. 

Reports say that Indian Prime minister Narendra Modi had non-cordial talks with the Canadian Prime minister during the G20 summit where Mr. Modi expressed India’s concerns about anti-India activities present in Canada. In such a situation, the global trade platform must be deeply thinking about the impacts on trade relations between the countries. Countries have bilateral trade and investment ties amounting billions of dollars. Reports say that current political developments had paused the chance for negotiations for a free trade agreement between the countries. 

On the other hand, some experts say that India-Canada flaring tensions are not going to affect trade finance services and investments between the countries. Investment ties are driven by commercial conditions and both the countries do business in complementary products and not on similar products. 

Global Trade Research Initiative (GTRI) Co-Founder Ajay Srivastava said that the growth of trade and business finance between the countries will not stop and not have any impact on day-to-day events. He noted that recent diplomatic conditions will not affect people’s connections as it is deep rooted, and won’t have any impact on export finance or import finance ties. 

Reliable sources report that bilateral trade between India and Canada has developed in recent times, reaching $8.16 billion in the 2022-23 financial year. India exports gems, pharmaceuticals, textiles and machinery, reaching $4.1 billion while Canada exports timber, pulses, pulp, and mining products to India, reaching $4.06 billion.  

Experts say that Canadian pension funds won’t stop investing in India as India has a large market with good return on money investment elements. During 2022, Canadian pension funds invested around $45 billion in India and as per reports it made India the fourth largest recipient of Canadian FDI. The Canadian pension fund invests in infrastructure, technology, renewable energy and financial services and the fund has invested in many big Indian companies including ICICI bank, Paytm, Kotak Mahindra Bank, Nykaa, Wipro and Delhivery. 

Technocraft Industries chairman says that the current frosty relations between the countries are certainly a reason for concern. However, he believes that bilateral trade is driven by commercial elements and political considerations are temporary and should not affect trade relations. He reminded that even with China, India has bitter relations but bilateral trade between the countries seems to be remaining healthy. 

Experts believe that bilateral trade is a great element to enhance political relations. Business finance platform expects that the country will make special efforts to improve bilateral trade with Canada. Educational partnership between India and Canada is very strong with more than 200 educational partnerships with institutions both in India and Canada. Besides this, more than 3,00, 000 Indian students are enrolled in Canadian colleges and universities, which makes them the biggest international student cohort in Canada. 

Canadian Bureau for International Education (CBIE) reports that Indian students have contributed around $4-9 billion to the Canadian economy in 2021. As per their records, Indian students are the biggest international student group in Canada, which accounts for 20% of total international students in 2021. Both countries enjoy benefits from educational partnerships and so, the current political conditions may not have any effect on the relationship. 

Hence, we can hope that both countries will take necessary actions to overcome the current political situation, and all this won’t affect India-Canada business trade and investment ties.