India-Canada Row: Experts Say Diplomatic Tensions Unlikely To Impact Trade Ties

The current flare-up in geopolitical relationships began as Canadian PM Justin Trudeau accused the Indian government of having possible links with the killing of a Khalistani separatist leader.

The bilateral trade between India and Canada has reached $8.16 billion in the fiscal year 2022-23.

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The diplomatic tensions are unlikely to impact trade relations between India and Canada, as economic ties are driven by commercial considerations, experts said. The current flare-up in geopolitical relationships began as Canadian Prime Minister Justin Trudeau accused the Indian government of having possible links with the killing of a Khalistani separatist leader in June. 

The North American country asked an Indian official to leave that country. In retaliation, India also expelled one of the Canadian diplomats. 

Global Trade Research Initiative (GTRI) Co-Founder Ajay Srivastava told news agency PTI that recent events are unlikely to affect the deep-rooted people-to-people connections, trade, and economic ties between the two nations. Both countries, according to Srivastava, don't compete on similar product sections. 

"Hence, the trade relationship will continue to grow and not be affected by day-to-day events," Srivastava said.

According to Sharad Kumar Saraf, Chairman of Mumbai-based Technocraft Industries, "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." 

However, he noted that the current frosty relations are certainly a cause for concern.

"In fact, bilateral trade is an effective tool to improve political relations. India must make special efforts to increase our bilateral trade with Canada," Saraf said.

Notably, India and Canada put a hold on the free trade agreement negotiations ahead of the G20 leaders summit, according to a senior official. Additionally, last week Canada’s Trade Minister Mary Ng postponed her trade mission to India set for October. 

India-Canada Trade Ties

The bilateral trade between India and Canada reached $8.16 billion in the fiscal year 2022-23, reported PTI.  India's exports to Canada, totaling $4.1 billion, consist of items such as pharmaceuticals, gems and jewelry, textiles, and machinery. On the other hand, Canada's exports to India, valued at $4.06 billion, include commodities like pulses, timber, pulp and paper, as well as mining products.

Additionally, Canadian pension funds have expressed their commitment to continue investing in India due to the country's vast market potential and attractive returns on investment, the report said. As of the end of 2022, Canadian pension funds injected over $45 billion into India, making it the fourth-largest recipient of Canadian Foreign Direct Investment (FDI) globally. Key sectors attracting Canadian pension fund investments in India encompass infrastructure, renewable energy, technology, and financial services.

India and Canada also share a growing educational partnership, with more than 200 collaborative initiatives between Indian and Canadian educational institutions, as per the report.

The enrollment of over 319,000 Indian students in Canadian institutions positions them as the largest group of international students in Canada, according to the GTRI. The Canadian Bureau for International Education (CBIE) reported that Indian students contributed $4.9 billion to the Canadian economy in 2021, constituting 20 per cent of all international students in Canada.