Although experts say there may not be an immediate impact, the heightened diplomatic tensions between India and Canada could have a negative influence on economic relations if the rift grows. Even though talks were progressed and both parties planned to finalize the agreement by the end of this year, negotiations for an early harvest trade agreement between the two countries were suspended earlier this month due to “political” concerns.
An FTA, which was planned, may have aided several industries in gaining better market access. That chance would now be postponed. That much of a loss has occurred. Trade, though, can be impacted if tensions rise and more retaliatory acts are taken. India exported $4.11 billion to Canada in FY23 compared to $3.76 billion in FY22. This translates to an export share of only about 1% for Canada compared to the rest of the world.
Medicines, clothing, diamonds, chemicals, gems and jewellery, seafood, engineering products, grains, and electrical equipment are among India’s top exports. However, exporters warned that the export of engineering items, such as machinery and iron and steel products, may be negatively impacted.
Canada’s imports totalled $4.05 billion, an increase of 29.3%. India’s import dependence on Canada is merely 0.56 percent compared to the rest of the globe, and it primarily consists of goods like diamonds, bituminous coal, aircraft, crude oil, fertilizers, and pulses.
Infrastructure, renewable energy, technology, and financial services are the top industries in India where Canadian pension funds invest. The Canada Pension Plan Investment Board (CPPIB), a power transmission firm, made the largest investment by Canadian pension funds in India in 2022 when it invested $1.1 billion in India Grid Trust.