Data Lab: Will the clash over Nijjar murder turn India-Canada trade ties sour?

Trade negotiations between India and Canada have hit a snag amid escalating tensions. Canadian Prime Minister Justin Trudeau’s mention of a probe into “credible allegations” connecting New Delhi’s agents to the assassination of Khalistani terrorist Hardeep Singh Nijjar has further strained relations.

On Tuesday (September 19), New Delhi dismissed these allegations as “absurd” and urged Canada to take action against anti-India elements operating on its land. This comes as a surprise move, given that just three months ago, both countries expressed their intent to finalise an initial agreement within the year.

Experts say the Comprehensive Economic Partnership Agreement (CEPA) between Canada and India has the potential to substantially boost bilateral trade by up to $6.5 billion, with Canada’s GDP standing to gain between $3.8 billion and $5.9 billion by 2035.

Recent years have witnessed a steady increase in goods trade, with total trade reaching $8 billion in 2022. Indian exports to Canada totalled $4 billion, mirroring imports from Canada, which were also valued at over $4 billion.

Canada primarily exports energy products, including coal, coke, and briquettes, along with fertilisers, while India exports consumer goods, clothing, engineering products like auto parts and aircraft equipment, as well as electronic items according to Trading Economics, a repository on global economic indicators. 

What does Canada export to India?

Notably, Canada’s main exports to India in 2022 comprised fossil fuels and related products valued at nearly $1 billion, followed by fertilisers at approximately $748 million, and wood pulp and plant fibres worth about $384 million. 

Pharmaceutical products, worth about $418 million, constituted the bulk of Indian exports in the previous year, followed by iron and steel products at approximately $328 million and machinery, nuclear reactors, and boilers at around $287 million.

India’s increasing demand for lentils has been a boon for Canadian farmers, while Indian pharmaceutical and software companies have expanded their presence in the Canadian market.

Notably, Canada ranks as India’s 17th largest foreign investor, injecting more than $3.6 billion since 2000. Canadian portfolio investors have also made substantial investments in Indian stock and debt markets.

The Canadian Pension Plan (CPP) increased its investments in Indian markets to around $15 billion, primarily in areas like real estate, renewables, and the financial sector by the end of the last fiscal year in March 2023.

Over 600 Canadian companies, including Bombardier and SNC Lavalin, have established a strong presence in India, while more than 30 Indian companies, such as TCS, Infosys, and Wipro, have invested billions in Canada, generating thousands of jobs.

Since 2018, India has been the leading source country for international students in Canada. In 2022, their numbers surged by 47 per cent to nearly 320,000, constituting about 40 per cent of all overseas students, as reported by the Canadian Bureau of International Education. This influx also enables universities and colleges to provide subsidised education to domestic students.

Top countries of study permit holders with a valid permit in Canada in 2022

Many analysts are concerned that deteriorating relations between the two nations could impact the economic well-being of thousands of Sikh families in India’s Sikh-majority state of Punjab. These families have relatives in Canada who remit millions of dollars back home. According to the 2021 census, Canada’s Sikh population has more than doubled over 20 years, reaching 2.1 per cent, driven by a significant migration of Sikhs from India in pursuit of higher education and employment opportunities.

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