 "Will India’s spat with Canada hit trade, visa services and investments?")
A new low in India’s diplomatic relations with Canada has sparked concerns about its potential impact on economic ties and visa services. Tensions reached a new height after both countries expelled each other’s top diplomats earlier this week.
New Delhi expelled six high-ranking Canadian diplomats and withdrew its diplomats from Canada on Monday (October 14). Ottawa said it expelled six Indian diplomats including the High Commissioner Sanjay Kumar Verma after naming him and other officials as “persons of interest” in the killing of Khalistani separatist Hardeep Singh Nijjar on Canadian territory.
The ties between the two nations took a downturn last September when Canadian Prime Minister Justin Trudeau alleged the “potential” involvement of Indian officials in Nijjar’s murder. New Delhi has described Canada’s allegations against Indian diplomats as “preposterous imputations” and part of the Trudeau government’s “vote bank” politics.
As India’s relations with Canada become more strained, let’s take a look at whether it will affect commercial relations and visa services between the two nations.
Visa services
Canada is among the top destinations for Indian students who want to study abroad. Indian students account for roughly 40 per cent of all international students in Canada, as per the National Foundation for American Policy (NFAP). Official data shows that as many as 427,000 Indians are studying in the North America country.
According to NFAP, the number of Indians immigrating to Canada has seen a sharp jump, from 32,828 in 2013 to 139,715 in 2023.
Amid the ongoing row, the Ministry of External Affairs (MEA) has said that New Delhi “reserves the right to take further steps” after Ottawa’s charge against Indian diplomats. The tensions have triggered concerns among visa seekers.
However, experts believe the current standoff between India and Canada is unlikely to directly affect visa policies.
“It’s important to understand that the current dispute between India and Canada has almost no bearing on immigration issues. In geopolitical terms, Canada has been clear about keeping these matters separate,” Russell A Stamets, Partner at Circle of Counsels, told Business Standard.
The expelling of diplomats could mean that visa processing would become longer for applicants. Those applying for visas were already facing delays due to a cut in the number of Canadian diplomats in India last year.
Canada had recalled its 40 diplomats from India as New Delhi called for “parity” in diplomatic presence.
“The reduction in diplomatic staff means longer wait times for visa processing, and this will mostly affect Indians. The current dispute will help Canada by reducing the volume of visa applications they have to handle, but it hurts individuals here in India who are looking to travel,” Ajay Sharma, an immigration consultant and the founder of Abhinav Immigration Services, was quoted as saying by Business Standard.
Similarly, the processing time for Indians seeking permanent residency (PR) in Canada or visa renewals could increase due to decreased staff at Indian consulates.
Meanwhile, representatives of the Guru Nanak Sikh Gurdwara in Surrey, BC, whose president was Nijjar, have called on the Canadian government to shut down India’s consulates in Vancouver and Toronto. As per Canada’s CBC News, Gurkeerat Singh, a spokesperson for the gurdwara, said, “The safety and the security of Sikhs will still be in question” unless Indian consulates were closed.
Trade ties
The diplomatic fallout will not affect bilateral trade and investment, as per reports. Canada’s main exports to India include potash, pulses, industrial chemicals, iron scrap, copper, minerals, and gemstones.
India exports gems, pharmaceuticals, marine products, jewellery, precious stones, mechanical appliances, organic chemicals and iron and steel articles to Canada.
A source in the Indian government told Reuters, “We are not immediately concerned about trade ties. Our bilateral trade with Canada is not very large.”
Canada accounts for less than one per cent of India’s total trade.
Bilateral trade between India and Canada witnessed a slight uptick from $8.3 billion in financial year (FY) 2023 to $8.4 billion in FY2024.
India’s imports from Canada rose from $4.1 billion in 2016-17 to $4.6 billion in 2023-24. During the same period, its exports increased from $2.0 billion to $3.8 billion.
According to a report by the think tank Global Trade Research Initiative (GTRI), there has not been a significant impact on trade between India and Canada despite political tensions.
“Despite these significant political frictions, the on-ground impact on trade between the two countries has been minimal. This is largely because trade happens at the private-sector level, and neither India nor Canada has introduced regulations that restrict the flow of goods or services”, Ajay Srivastava, founder of GTRI, told Mint.
“In other words, while diplomatic relations may have soured, businesses on both sides have continued to engage, insulated from the political noise,” Srivastava added.
Speaking to Indian Express, Federation of Indian Export Organisation (FIEO) Director General Ajay Sahai said that India’s nearly 25 per cent of total pulses imports and 5 per cent of total fertiliser imports come from Canada. But this can be “easily substituted”, he said.
Canada has assured that the diplomatic row with India would not impact commercial ties. “I want to reassure our business community that our government remains fully committed to supporting the well-established commercial ties between Canada and India,” Canadian trade minister Mary Ng said in a statement on Monday (October 14), as per Reuters.
“We will work closely with all Canadian enterprises engaged with India to ensure these important economic connections remain strong.”
But not all have been hunky-dory in business ties. Talks for a proposed Free Trade Agreement (FTA) between the two countries have been paused since September 2023 when Trudeau first made the allegations. This further downgrade in relations may mean the deal would not happen.
According to the GTRI report, “For now, the resilience of trade between India and Canada highlights an important lesson — diplomatic tensions, while damaging, do not always spell disaster for economic ties. But as this dispute drags on, both nations will need to carefully manage their actions to avoid a full-blown economic fallout.”
Investments
Canadian investment is also not likely to be affected amid the escalation in tensions. Canadian funds have invested a total of over $54 billion in India.
As per the MEA, more than 600 Canadian companies have a presence in India and over 1,000 companies are actively pursuing business in the Indian market.
Canadian investments make up for 0.5 per cent of the total foreign direct investment (FDI) inflows into India. Canada is India’s 18th-largest foreign investor. Canadian pension funds have cumulatively invested over $75 billion in India, according to the MEA.
Canadian investments have been in several key sectors in India, including infrastructure, renewable energy, technology and financial services.
“The Indian market is too large an investment opportunity for Canadian investors to miss. If the investors don’t enter directly, it will be rerouted through Singapore, Hong Kong or UAE. That aside, India has significant investment interests from the US and elsewhere to offset any hit from Canada,” a senior government official told Indian Express.
Government officials say investments would not bear the brunt of the diplomatic spat between India and Canada.
“Canadian investments into India, especially through Canada’s pension fund and other investments are relatively small. Also, businesses invest in markets where they get good returns. So, the political difference between both governments is unlikely to impact investment,” an Indian government official said, as per Mint.
With inputs from agencies
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