Ties between India and Canada hit a new low on Monday after Ottawa again suggested India's involvement in the killing of Khalistani terrorist Hardeep Singh Nijjar.
Canada's move to identify Indian envoys as "persons of interest" in the probe drew a strong reaction from India and prompted New Delhi to expel several Canadian envoys and recall its high commissioner from Ottawa.
This marked a major downturn in already frosty ties between the two countries.
So far, diplomatic tensions have not impacted the bilateral trade in goods between the two countries, think tank Global Trade Research Initiative (GTRI) said on Monday.
It warned that if the dispute drags on, both nations will need to carefully manage their actions to avoid a full-blown economic fallout.
India-Canada economic ties
Historically, India and Canada have shared a strong economic partnership. In its note on bilateral ties in 2023, the ministry of external affairs (MEA) said that trade and investment linkages form an "integral component of the multi-faceted partnership between the two countries."
In 2023-24, India's imports from Canada rose to $4.6 billion, while exports saw a marginal dip, falling to $3.8 billion.
The bilateral merchandise trade between India and Canada grew slightly from $8.3 billion in 2022-23 to $8.4 billion.
According to MEA figures, in 2023 (January-October), bilateral trade in goods amounted to $7.65 billion, with exports at $4.70 billion and imports at $2.95 billion.
India has also received $4 billion foreign direct investments from Canada during April 2000 and June 2024.
Moreover, Canadian Pension Funds have cumulatively invested over $75 billion in India and are increasingly viewing India as a favourable destination for investments.
The MEA had said that over 600 Canadian companies are present in India and more than 1,000 companies are actively pursuing business in the Indian market.
"Indian companies in Canada are active in the field such as Information Technology, software, steel, natural resources and banking sectors," it said.
The MEA said that Indian exports to Canada include gems, jewellery and precious stones, pharmaceutical products, ready-made garments, mechanical appliances, organic chemicals, light engineering goods, iron & steel articles, etc. India’s imports from Canada include pulses, newsprint, wood pulp, asbestos, potash, iron scrap, copper, minerals and industrial chemicals, etc.
GTRI founder Ajay Srivastava said that economic ties between the two countries have remained stable over the last year, unaffected by the diplomatic storm brewing in the background.
"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," he said.
(With inputs from agencies)
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