Diplomatic row unlikely to impact trade and investment ties: Report

The ongoing diplomatic tensions between India and Canada will not significantly affect bilateral trade and investment relations. Despite escalating tensions, including the withdrawal of India's high commissioner from Canada, officials emphasise that the value of trade between the two nations remains relatively modest.

The bilateral merchandise trade saw a slight increase from $8.3 billion in 2022-23 to $8.4 billion in 2023-24, with India's imports from Canada rising to $4.6 billion, while exports dipped to $3.8 billion. During the first four months of the current fiscal year, India’s exports to Canada totaled $1.3 billion, and imports reached $1.37 billion.

Canadian investments could be routed through other countries such as Singapore, the UAE, and the US, minimising any potential disruptions, news agency PTI reported, quoting government sources. They highlighted India’s attractiveness as an investment destination, with American industries reportedly eyeing opportunities worth $3 trillion in the Indian market.

While Canada has been India's primary source of lentils, officials mentioned that alternative sources like Australia could easily fill the gap. Additionally, the educational sector remains a strong avenue for collaboration, with over 200,000 Indian students currently studying in Canada.

The diplomatic tensions escalated after Canadian Prime Minister Justin Trudeau accused India of being involved in the killing of Sikh separatist leader Hardeep Singh Nijjar, leading to the expulsion of diplomats and a pause in Free Trade Agreement (FTA) negotiations. Both countries had previously engaged in discussions regarding an interim agreement, the Early Progress Trade Agreement (EPTA), aimed at reducing customs duties and easing trade barriers.

Despite the suspension of FTA talks, analysts from the Global Trade Research Initiative (GTRI) have pointed out that the halt does not severely harm Indian trade interests, as over half of India's exports to Canada already enter duty-free.

Overall, the diplomatic spat has not yet translated into economic fallout, but experts warn that both nations must carefully manage their relations to avoid further escalation. As of now, India has received approximately $4 billion in foreign direct investment from Canada since 2000, with Canadian pension funds having invested over $75 billion in the Indian market.