The diplomatic relationship between India and Canada witnessed an unprecedented low after India on Monday announced withdrawing its high commissioner and other "targeted diplomats and officials" from Ottawa, following a strong dismissal of Ottawa's allegations linking the envoy to an investigation into the killing of Sikh extremist Hardeep Singh Nijjar.
The deteriorating diplomatic ties between the two countries will have multi-dimensional implications as the people-to-people connection between the two nations is very deep. The roots of lakhs of Canadians are in India, specifically in Punjab. In the scenario of a further worsening relationship, the visa policies of both countries may have adverse impacts, subsequently, people would face hurdles in travelling. However, as far as the impact on trade between India and Canada is concerned, there is less to worry about as so far there is no sign of any adverse effect on the business between the two in the last few years despite occasional jolts in ties.
According to the think tank Global Trade Research Initiative (GTRI), the diplomatic tensions between India and Canada have so far not impacted the bilateral trade in goods.
However, GTRI cautioned that in the given scenario, both nations need to manage their actions carefully to avoid a full-blown economic fallout.
India exports THESE products to Canada
According to the Observatory of Economic Complexity (OEC), In 2022, India exported USD 5.37 billion to Canada. The main products exported from India to Canada were packaged medicaments worth USD 406 million, motor vehicles, parts and accessories USD 180 million and Jewellery USD 177 million. During the last 5 years, the exports of India to Canada have hiked at an annual rate of 14 per cent.
USD 8.4 billion trade between India and Canada in 2023-24
The volume of bilateral trade between India and Canada is around USD 8.3 billion this financial year. The merchandise trade actually grew slightly from USD 8.3 billion in 2022-23 to USD 8.4 billion in 2023-24.
India's imports from Canada worth USD 4.6 billion
India's imports from Canada increased to USD 4.6 billion, while exports saw a marginal dip, falling to USD 3.8 billion. These figures suggest that, at least for now, economic ties remain stable, unaffected by the diplomatic storm brewing in the background, GTRI asserted.
India received investment of USD 4 billion during 2000-2024
India received USD 4 billion foreign direct investments (FDI) from Canada between April 2000 and June 2024. "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 Founder Ajay Srivastava said.
Hardeep Singh Nijjar's murder damages India-Canada ties
India's move to withdraw its high commissioner and other "targeted diplomats and officials" from Canada came up as a major downturn in already fragile ties between the two nations. India's decision came shortly after the Canadian Charge d'Affaires Stewart Wheelers was summoned to the Ministry of External Affairs (MEA) and was told bluntly that the baseless "targeting" of Indian High Commissioner Sanjay Verma and other diplomats and officials was "completely unacceptable". Canada continuously accused India of having links to the killing of Sikh extremist Hardeep Singh Nijjar.
The strain started when Canadian Prime Minister Justin Trudeau accused India of involvement in the killing of a Canadian citizen and Sikh separatist leader.
A pause on Free Trade Agreement (FTA) talks
This allegation by the Trudeau government led to a back-and-forth expulsion of diplomats and a pause on Free Trade Agreement (FTA) talks.
"Despite these significant political frictions, the on-ground impact on trade between the two countries has been minimal. This is largely because trade happens at the private-sector level, and neither India nor Canada has introduced regulations that restrict the flow of goods or services," he said.
(With agency inputs)
