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India-Canada Relations: Analyzing Trade Ties Amid Political Tensions

India-Canada Relations: Analyzing Trade Ties Amid Political Tensions


The relationship between India and Canada, two of the world's largest democracies, has witnessed a few ups and downs recently. Here's a comprehensive deep-dive into the current scenario, focusing on trade relations between these two nations.

Diplomatic Strains: The Background

India and Canada have entered a tense phase, with both nations expelling diplomats.
The tension escalated when Canadian Prime Minister Justin Trudeau pointed fingers at Indian government officials regarding the demise of Khalistani activist, Hardeep Singh Nijjar.
India responded by requesting a senior Canadian diplomat to depart. These expulsions signal a dip in the diplomatic rapport between the two countries.


A Pause in Free Trade Negotiations

India and Canada had revived their negotiations on a potential free trade agreement (FTA), a significant step after a decade of inactivity.
 However, undisclosed political concerns have temporarily halted these discussions. 
Despite the challenges, there is optimism that once political differences are settled, the discussions will proceed.


Trade Data Highlights: India and Canada

According to Invest India, the nation's investment promotion agency:
●    Canada stands as the 18th major foreign investor in India.
●    Between April 2000 to March 2023, Canada invested approximately $3,306 million in India.
●    This means Canada's investment was nearly 0.5% of the total Foreign Direct Investment (FDI) influx to India.
●    In 2022, India was recognized as Canada's ninth-largest trading associate.
●    Sectors like services and infrastructure garnered 40.63% of the entire FDI investments from Canada to India.
●    Over 600 Canadian enterprises have established their footprint in India, with more than 1,000 companies actively exploring business opportunities in the Indian arena.

Based on data from the Ministry of Commerce:

  • India's exports to Canada for FY23 were valued at $4,109.74 million, about 0.9% of India's total yearly exports.
  • Conversely, imports from Canada to India during FY23 were nearly $4,051.29 million, which was about 0.6% of India's overall annual imports.
  • Key commodities in this trade relationship include pharmaceuticals, gems, textiles, and machinery from India, while Canada primarily exports pulses, timber, pulp, paper, and mining-related products to India.
  • Furthermore, in 2022, India received personal remittances from Canada amounting to roughly $859.83 million, as reported by the World Bank.


Trade Impacts: An Overview


  • Despite the ongoing diplomatic issues, economic experts predict that the trade relations between India and Canada will remain resilient. 
  • This is largely because the two countries focus on trading complementary products rather than being direct competitors.
  • Furthermore, Canadian pension funds, which had invested over $45 billion in India by the end of 2022, are anticipated to continue their investments. 
  • These funds primarily target sectors in India like infrastructure, renewable energy, technology, and financial services.


  • In the grand scheme of things, while political relations may face occasional strains, the trade and economic ties between India and Canada are likely to remain robust.
  • Commercial interests, the complementary nature of their traded goods, and the vast potential of the Indian market make it a lucrative proposition for Canadian investors.

copyright 2022 Ojaank Foundation.