A diplomatic dispute between India and Canada has emerged, following allegations surrounding the death of a Canadian Sikh activist. This situation has raised concerns about its potential impact on the growing trade and investment relationship between the two countries.
In 2023, Canadian Prime Minister Justin Trudeau publicly accused India of involvement in the murder of Hardeep Singh Nijjar, a separatist figure who was shot in Vancouver. The Indian government responded by briefly curtailing visas for Canadians and requesting the withdrawal of several diplomats. Recently, both nations expelled each other’s top envoys amid ongoing tensions.
Despite the diplomatic fallout, trade between India and Canada has shown resilience. According to India’s commerce ministry, bilateral merchandise trade increased from approximately $6.36 billion in 2019 to $8.27 billion in 2023, and further rose to $8.4 billion in fiscal 2024. India’s primary exports to Canada include pharmaceuticals, steel, iron products, and electrical machinery, while Canada is a vital source of fertilizers for India.
Experts suggest that immediate trade impacts may be limited unless either country decides to implement trade bans. “Companies in both countries export and import based on their needs. Unless either India or Canada choose to ban trade in some segments, it is unlikely that bilateral trade will be hurt,” said Ajay Srivastava from the Global Trade Research Initiative.
The ongoing diplomatic tensions could affect efforts to establish a free-trade agreement, which had already been on hold prior to the current dispute. Investment relations also remain significant, with Canadian pension funds investing around $55 billion in India. Indian firms have also contributed to Canada’s economy, creating jobs and making substantial investments, particularly in the IT sector.
Additionally, Indian students represent a significant portion of international students in Canada, contributing around $7 billion annually to the education sector. However, recent reports indicate a 15% drop in Canadian study permit applications from India, a trend influenced by various factors, including changing regulations and job market conditions.
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