The recent India Canada News states that ties have been strained and it has happened since September last year. In one of the most significant escalations of tensions between India and Canada, India has ordered the expulsion of six Canadian diplomats. It has also announced the withdrawal of its High Commissioner to Canada, along with other “targeted diplomats”. This indicates that it has been raising concerns about a spillover effect on bilateral business engagements. Along with it, it also includes Canadian pension fund investments worth $75 billion in India. This decides the fate of paused negotiations for a proposed trade agreement and the inflow of remittances into India.
India Canada News: When Does This Escalation Come In?
India Canada News comes at escalation at a time when India and several western countries have been seeking closer economic integration in a bid to decouple from China. Therefore, capitalising on the geopolitical opportunity, India has been negotiating free trade agreements (FTAs). This is being done with nearly half a dozen economic blocs and countries, including the European Union and the UK.
What Has The Diplomatic Tensions Done So Far?
India Canada News regarding the diplomatic tensions have already impacted negotiations with Canada. This was for a modern FTA, which could have meant a lot of better export opportunities for Indian garments. This meant leather, and machinery products in Canada, and with it, also a greater collaboration in the booming services sector in both countries. However, the escalation in tension in the India Canada news may well mean that the deal may no longer be on the table.
What Does Canada Have With India?
Beyond the missed trade deal opportunity which is in the India Canada News, Canadian companies, especially Canadian pension funds, have considerable investments in India. While, a lot of Canadian pension funds have significant investments in India. This is according to what the Ministry of External Affairs, asset management companies and financial services firms headquartered in Canada have invested in. These are the key sectors of India’s economy, thus making and bringing in investors keenly observe these diplomatic shifts.
Federation of Indian Export Organisation (FIEO) Director General Ajay Sahai said that Canada contributes to nearly 1 percent of total exports. It also has similar levels of imports in India’s over the trade basket. However, about 25 percent of the total number of pulses import and 5 percent of total fertiliser imports are sourced from Canada. These can be easily substituted as per what the officials stated with regard to the India Canada News.
“The Indian market is too large an investment opportunity for Canadian investors to miss. If the investors don’t enter directly, it will be rerouted through Singapore, Hong Kong or UAE. That aside, India has significant investment interests from the US and elsewhere to offset any hit from Canada,” a senior government official said.
Trade Ties With Canada According To The India Canada News
Major items of India’s exports to Canada include gems, jewellery and precious stones. It also includes pharmaceutical products, ready-made garments, mechanical appliances, organic chemicals, light engineering goods, iron and steel articles, etc. Meanwhile, India’s imports from Canada include pulses, newsprint, wood pulp, asbestos, potash, iron scrap, copper, minerals, and industrial chemicals, etc.
“India’s trade with Canada has not been that significant. There is nothing worrying so far as bilateral trade isn’t that big to significantly impact the overall trade basket. For instance, we import lentils from Canada. It can easily be replaced by Australia. We are already negotiating a larger trade agreement with them,” the official said.
As far as bilateral merchandise trade between India and Canada is concerned, it has shown a slight upward trend. This was from an amount of $8.3 billion in FY2023 to $8.4 billion in FY2024. Also, India’s imports from Canada increased to $4.6 billion. On the other hand, exports saw a marginal dip which were falling to a $3.8 billion.
“For now, the resilience of trade between India and Canada highlights an important lesson — diplomatic tensions, while damaging, do not always spell disaster for economic ties. But as this dispute drags on, both nations will need to carefully manage their actions to avoid a full-blown economic fallout,” GTRI said.