India-Canada tensions to impact trade, investments

Trade and investments between India and Canada is set to take a hit due to flaring diplomatic tensions between the two countries over the allegations related to the killing of Khalistani activist Hardeep Singh Nijjar.

The negotiations on free trade agreement have been paused and unlikely to be resumed until the diplomatic row is settled, sources said.

The negotiations for India-Canada Comprehensive Economic Partnership Agreement (CEPA) was re-launched in March 2022. Until July 2023, nine rounds of talks were conducted and the target was to conclude the deal by the end of the year.

Canadian Trade Minister Mary Ng, who was scheduled to lead a trade mission to India in October, has indefinitely postponed the visit.    

India’s Commerce and Industry Minister Piyush Goyal has confirmed the pause on trade talks saying “We need to make sure that geopolitically and economically we are on the same page.”

India-Canada bilateral trade stood at $8.16 billion in the financial year ended March 2023.  Canada is among the largest sources of FDI in India. The trade is evenly balanced. During the financial year 2022-23, India’s exports to Canada stood at $4.1 billion, while imports were valued at $4.06 billion.

India’s major imports from Canada include mining products like coal, coke and briquettes, fertilisers, timber, pulp and paper, while Canada’s imports from India include consumer goods, garments, electronic items, auto parts, and gems and jewellery.

Canadian pension funds are among the biggest sources of foreign direct investment (FDI) in India. The Canadian Pension Plan Investment Board (CPPIB) has investments in several top Indian companies including Paytm, Kotak Mahindra Bank, Zomato, Nykaa, Delhivery, Wipro, Infosys and ICICI Bank.

Over 600 Canadian companies have a presence in India. Prominent Canadian companies having significant business in India include Bombardier and SNC Lavalin. The Indian IT firms like TCS, Infosys and Wipro have invested heavily in Canada.

However, some experts argue that the diplomatic row is unlikely to have any drastic impact on the deep-rooted people-to-people connections between the two countries.

“The bilateral trade is entirely driven by commercial considerations. Political turmoil is of a temporary nature and should not be a reason to affect trade relations,” a Mumbai-based exporter and Chairman of Technocraft Industries Sharad Kumar Saraf, told PTI.

To buttress his argument, Saraf pointed out that India-China bilateral trade continued to remain healthy despite acrimonious diplomatic relations.

India has been the largest source country for international students in Canada accounting for nearly 40% of total overseas students. According to the Canadian Bureau of International Education, the number of Indian students in Canada rose to 320,000 in 2022, which is 47% higher when compared with 2018 data.

As per the Canadian Bureau for International Education (CBIE), Indian students contributed $4.9 billion to the Canadian economy in 2021.

Cut-off box - Britain says to continue trade talks with India despite Canada allegations LONDON Reuters: Britain will continue trade talks with India despite allegations from Ottawa that the Indian government was involved in the murder of a Sikh separatist leader in Canada Prime Minister Rishi Sunak’s spokesperson said on Tuesday.

The spokesperson reiterated that Britain was in touch with Canada about the “serious allegations” but said it would not have a bearing on trade talks with India. “Work on the trade negotiations will continue as before. The Canadian authorities will now conduct their work and I’m not going to preempt them” the spokesperson told reporters.

“When we have concerns about countries we are negotiating trade deals with we will raise them directly with the government concerned. But with regards to the current negotiations with India these are negotiations about a trade deal and we’re not looking to conflate them with other issues.”