By Annunthra Rangan
In a sign of tentative diplomatic thaw, India’s External Affairs Minister Subramanyam Jaishankar and Canada’s newly appointed Foreign Minister Anita Anand held a constructive dialogue on the future of bilateral relations. Jaishankar stated that the two had “discussed the prospects of India-Canada ties” and extended his best wishes for Anand’s tenure. Anand, whose family traces its roots to India, described the exchange as productive and expressed her commitment to “strengthening Canada-India ties, deepening our economic cooperation, and advancing shared priorities.” This interaction marks an important step toward restoring diplomatic engagement following months of strained relations between the two countries.
In recent years, one of the key sources of tension between India and Canada has been the Khalistan movement and its supporters within Canadian borders. Advocating for an independent Sikh homeland in Punjab, the movement is viewed by New Delhi as a significant national security concern. Diplomatic relations between the two nations deteriorated sharply in September 2023 after the killing of Hardeep Singh Nijjar, a Canadian citizen and prominent Khalistani activist in Surrey, British Columbia. Canadian Prime Minister Justin Trudeau stated there were “credible allegations” suggesting involvement of Indian agents in the incident. India strongly refuted the claim, calling it baseless and countering that Canada had become a hub for extremist elements threatening Indian sovereignty.
Tensions were further heightened in November 2023 when a U.S. federal court unsealed an indictment linking an Indian official to an attempted assassination plot targeting a Khalistani figure on American soil. In October 2024, the U.S. Department of Justice formally charged the individual, Vikash Yadav, and suggested possible ties between this case and Nijjar’s murder in Canada. Notably, New Delhi responded with a more measured approach to the U.S. allegations, initiating a high-level internal investigation. In contrast, its stance toward Ottawa remained combative, deepening the diplomatic rift.
In the same month, Canadian authorities including the Royal Canadian Mounted Police accused Indian diplomats of connections to serious criminal activities within India, such as murder, extortion, and intimidation. This led to a new round of reciprocal expulsions of diplomats, driving bilateral relations to their lowest point in recent history. Around this time, Canada also began facing claims of foreign electoral interference attributed to India.
On January 28, 2025, the final report from the Public Inquiry into Foreign Interference in Federal Electoral Processes and Democratic Institutions, led by Commissioner Marie-Josée Hogue, identified India as the second most active foreign actor in Canadian elections, following China. The report highlighted intelligence indicating that proxy agents may have covertly offered illicit financial support to certain Canadian politicians, with the objective of promoting pro-India candidates or influencing officeholders. India’s Ministry of External Affairs categorically denied these assertions, rejecting what it called unfounded insinuations.
Canada’s 2022 Indo-Pacific Strategy acknowledged India as a critical partner, citing its increasing strategic, economic, and demographic relevance in the region. Despite this recognition, the economic relationship between the two nations remains underdeveloped. In 2022, India ranked as Canada’s 10th largest trading partner, yet the proportion of Canadian goods in India’s total imports has consistently remained low, hovering between 0.5 and 1 per cent. Similarly, India’s exports to Canada have constituted just 1 to 1.5 per cent of its total global exports.
In 2023, total bilateral merchandise trade between the two countries reached CAD 12.5 billion. Of this, Canadian exports to India accounted for CAD 5 billion, while imports from India stood at CAD 7.5 billion, resulting in a Canadian trade deficit of CAD 2.5 billion.
However, the services sector presented a contrasting picture. Canada posted a services trade surplus of CAD 10.8 billion in 2023 a sharp 90% rise from CAD 5.7 billion the previous year. This was primarily due to CAD 14.06 billion in services exports, including travel, business, and transportation services, compared to CAD 3.22 billion in services imports.
Negotiations for a Comprehensive Economic Partnership Agreement (CEPA) began in 2010. In March 2022, the two sides pursued a more targeted Early Progress Trade Agreement (EPTA), focusing on specific sectors. However, the diplomatic crisis that unfolded in September 2023 led Ottawa to suspend talks just before Prime Minister Justin Trudeau’s allegations regarding Indian involvement in the killing of Hardeep Singh Nijjar.
Canada’s merchandise exports to India in 2023 were heavily concentrated. The top 10 export categories made up 85.3% of total exports. Key sectors included:
Mineral fuels and oils: 21.67%
Edible vegetables, roots, and tubers: 15.98%
Fertilizers: 11.51%
India’s exports to Canada were more diverse, including electrical machinery, pharmaceuticals, mechanical appliances, and other industrial goods.
International education remains a cornerstone of economic ties. In 2022, international students contributed approximately CAD 31 billion to Canada’s GDP, with Indian nationals forming the largest group — representing 41% of student permits issued that year, and 37% by November 2023. Students from Punjab alone added nearly USD 8 billion to the Canadian economy in 2023. However, this sector came under pressure in 2024 due to immigration policy changes and the diplomatic fallout.
As of September 2023, Canada ranked as the 17th-largest foreign investor in India, with cumulative FDI of USD 4.05 billion – about 0.57% of India’s total FDI inflows. Notably, Canadian institutional investments (primarily by pension and mutual funds) surged from CAD 5 billion in 2014 to over CAD 55 billion in 2023. These investments span infrastructure, logistics, clean energy, banking, real estate, and more.
Key Canadian investors in India include:
Ontario Teachers’ Pension Plan Board
Canada Pension Plan Investment Board (CPPIB)
Ivanhoe Cambridge
Brookfield Asset Management
Fairfax India Holdings Corporation
From 2019 to 2023, India received 25% of Canadian pension fund flows, a significant increase from 10% during 2003–2018. Between 2013 and 2023, about 57% of these investments targeted real estate, financial services, and transportation, totaling over CAD 9.4 billion. Despite political tensions, Canadian investments continued to grow, with notable activity in Q4 2023, including a major investment in logistics company Xpressbees.
India’s FDI into Canada reached CAD 9.8 billion in 2023. An estimated 75–80 Indian companies operate in Canada, with 30 firms collectively investing over CAD 6.6 billion and generating nearly 17,000 jobs, according to a 2023 report by the Confederation of Indian Industry and the Canada India Business Council.
Major Indian companies in Canada include:
Tata Consultancy Services
Infosys
WIPRO
State Bank of India
ICICI Bank
Aditya Birla Group
Tata Steel
Jubilant Life Sciences
Canadian Businesses in India
Over 1,000 Canadian firms are active in India across sectors such as aviation, pharmaceuticals, engineering, IT, and consulting. Leading Canadian enterprises include:
Bombardier
SNC Lavalin
CAE Electronics
McCain Foods
Sun Life Financial
High-potential sectors for Canadian investment in India:
Clean energy
Infrastructure
Critical minerals
Advanced manufacturing
Agriculture (fertilizers and pulses)
High-potential sectors for Indian investment in Canada:
Information technology
Pharmaceuticals
Natural resources
Financial services
India also offers Canada avenues for economic diversification, supply chain resilience, and collaboration in areas like renewable energy and emerging technologies.
Significantly affected sectors
Tourism: The suspension of Indian visas for Canadian citizens in September 2023 led to a decline in Canadian tourist arrivals and economic losses in India’s tourism sector.
Foreign Direct Investment: Canadian FDI into India fell from CAD 5.3 billion in 2022 to CAD 3.9 billion in 2023. However, this mirrored a broader 47% drop in India’s overall FDI inflow, making it difficult to isolate the impact of bilateral tensions.
Trade: Contrary to expectations, bilateral trade remained stable. Annual goods trade increased from CAD 12.6 billion in 2023 to CAD 13.3 billion in 2024. Monthly trade volumes in September and October 2024 even slightly surpassed pre-standoff figures from early 2023.
Canada continues to be a leading supplier of lentils to India, maintaining robust export levels even amid diplomatic friction. Canadian lentil exporters have called for a revival of trade talks to solidify long-term prospects.
Canada formally concluded its bilateral development assistance program to India in 2006, after providing aid totaling CAD 2.39 billion over a span of 55 years. This decision aligned with India’s broader policy shift away from accepting direct foreign aid. Since then, Canadian development support has continued through alternate channels, including partnerships with Indian and Canadian non-governmental organizations, as well as through multilateral institutions such as the World Bank and the Asian Development Bank.
Current Canadian development funding in India is largely directed toward initiatives promoting sustainable economic growth, combating infectious diseases, improving nutrition, and advancing renewable energy access in underserved regions.
Additionally, the International Development Research Centre (IDRC), Canada’s principal development research institution maintains its Asia regional office in India. The IDRC continues to collaborate with Indian academic and research institutions on issues such as climate resilience, inclusive economic development, and gender equity.
During his tenure, Justin Trudeau appeared to have used foreign policy as a means to deflect attention from his domestic challenges. By portraying India as an adversary, Trudeau effectively shifted public discourse away from pressing internal issues. However, this approach reflected a lack of diplomatic maturity and risked inflicting long-term damage on a strategic bilateral relationship. Instead of opting for measured, quiet diplomacy, Trudeau chose to escalate tensions with India on the global stage, further straining ties at a critical juncture.
One of the most contentious and unresolved aspects of Trudeau’s tenure was his handling of allegations surrounding Chinese interference in Canada’s electoral processes. China emerged as the primary foreign actor accused of undermining Canadian sovereignty through covert operations, political influence, and economic leverage. Over several years, intelligence reports pointed to Beijing’s involvement in efforts to sway the outcomes of the 2019 and 2021 federal elections, including financial support for sympathetic candidates and attempts to promote policies favorable to Chinese interests.
In response, the Trudeau government established the Foreign Interference Commission to investigate and address external threats to Canada’s democratic institutions. While the commission initially concentrated on interference from China and Russia, recent diplomatic rifts with India raised concerns that New Delhi could also fall under its scrutiny. Despite domestic pressure to adopt a tougher stance on Beijing, Trudeau’s actions such as the delayed ban on Huawei’s participation in Canada’s 5G network were widely criticized as reactive and insufficient.
Trudeau’s limited response to Chinese influence left a vacuum in Canadian foreign policy and prompted efforts to redirect attention toward other geopolitical actors, such as India. However, this approach risked alienating a vital democratic partner at a time when both nations shared common concerns about China’s expanding footprint.
Given the scale and sophistication of Chinese influence operations, it is imperative for India and Canada to move past bilateral frictions and work collaboratively to safeguard their democratic systems. As two major democracies in the Indo-Pacific and beyond, both countries have a strategic interest in ensuring that foreign interference particularly from authoritarian regimes does not undermine their political institutions or public trust. Building a framework for joint intelligence-sharing, cyber defense, and policy coordination could help fortify their societies against external threats and restore confidence in bilateral engagement.
—The writer is a Senior Research Officer at Chennai Centre for China Studies. Her research interests constitute China-WANA (West Asia and North Africa) relations and human rights
The post India-Canada: Critical Partners Must Reset Diplomatic Ties appeared first on India Legal.