India-Canada Row Over Nijjar's Murder: The Implications of Strained Relations [Explained]

India and Canada's relationship is expected to be impacted by the ongoing diplomatic row following allegations made by Prime Minister Justin Trudeau against the Indian government's involvement in the killing of Khalistani leader Hardeep Singh Nijjar in June.

With both countries expelling a diplomat each and making strong statements, the ties between India and Canada might be further strained. How the escalating tension will impact the two countries?

Trade Talks, The First Casualty

Even before the Canadian PM made the explosive statement in the Parliament, Ottawa paused negotiations for a free trade agreement with India. "The Canadian side conveyed that they were taking a pause in India-Canada negotiations on the Early Progress Trade Agreement. This will enable us both to take stock of progress and next steps. We will decide by mutual agreement when negotiations will resume," an official had told PTI.

What About Financial Damage?

The immediate impact on the economy and finances is expected to be limited. While a trade agreement with India could have expedited Ottawa's shift away from the People's Republic, India represented just around $6.5 billion, accounting for less than 1 per cent of Canada's global trade in 2020.

This dispute might also lead politicians in Canada to adopt a more skeptical stance regarding any Indian-backed bid, such as JSW Steel led by Sajjan Jindal, for Vancouver-based Teck Resources' $8 billion coking coal business (TECKb.TO). This notable cross-border potential emphasizes India's eagerness, as the world's fifth-largest economy, to diversify its critical raw material supplies, moving them away from Australia.

The Key Items Of Trade

Sustained growth has led to a surge in goods trade, reaching $8 billion in 2022. Indian exports to Canada amounted to $4 billion, and imports from Canada were equally valued at $4 billion. Canadian farmers have reaped the benefits of India's increasing appetite for imported lentils, while Indian pharmaceutical and software firms have expanded their footprint in the Canadian market.

Key imports from Canada encompass energy products like coal, coke, and briquettes, along with fertilizers. On the other hand, India exports various consumer goods, garments, engineering products such as auto parts, aircraft equipment, and electronic items.

Investments

Canada has invested over $3.6 billion since 2000 and it stands as the 17th largest foreign investor in India, according to a report in Reuters. The Canadian portfolio investors have poured billions of dollars into Indian stock and debt markets. Notably, the Canadian Pension Plan (CPP) has significantly upped its investment in India's markets, reaching approximately $15 billion by the end of the last fiscal year in March 2023. These investments have been allocated across sectors like real estate, renewables, and the financial industry.

Also, over 600 Canadian companies, with industry giants like Bombardier and SNC Lavalin being prominent players have invested in India. And over 30 Indian companies, including major infotech firms like TCS, Infosys, and Wipro, have made substantial investments amounting to billions of dollars in Canada, generating thousands of job opportunities. A significant aspect of the relationship is the role of Indian students in Canada, as since 2018, India has stood as the largest source country for international students in the country.

In 2022, this figure surged by 47 per cent to almost 320,000, constituting approximately 40 per cent of the overall international student population, according to the Canadian Bureau of International Education. This influx of international students, including a significant portion from India, enables universities and colleges to offer subsidized education to domestic students, benefiting the education sector.

How The India-Canada Strained Relation Impacts Sikhs In India?

The escalating tensions may have ramifications for the economic interests of numerous Sikh families in Punjab. Many of these families have relatives in Canada who remit millions of dollars back home. Over the past two decades, the Sikh population's share in Canada has more than doubled to 2.1 per cent, as per the country's 2021 census.

This increase is attributed to a substantial migration of Sikhs from India in pursuit of advanced education and employment opportunities.