Recent political tensions between Canada and India have significantly escalated, affecting diplomatic relations between the two nations. The friction stems from Canada’s allegations that Indian operatives were involved in the death of Hardeep Singh Nijjar, a Canadian citizen. In response, both countries have expelled diplomats, further straining their diplomatic ties, while India temporarily stopped issuing travel visas to Canadians.
However, despite these political challenges, trade relations between Canada and India have shown remarkable resilience with no impact on trade relations, as demonstrated by a recent report from Asia Pacific Foundation of Canada.
When the results of India’s national election were announced on June 4, Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP) — politically dominant for a decade and seemingly invincible to some — may have had mixed feelings about the outcome.
Although Indian voters granted the National Democratic Alliance, led by the BJP, a third term, they significantly reduced the party’s share of seats in the Lok Sabha, the lower house of parliament. Nevertheless, the Indian government received good news regarding the economy: for the fiscal year ending March 2024, the Indian economy grew at an impressive 8.2 percent, up from seven percent the previous year. This growth was reportedly driven by state spending on infrastructure and increased momentum in manufacturing and construction. If these growth rates continue, India is on track to become the world’s third-largest economy by 2027.
Analyzing bilateral trade and investment data provides insight into Canada-India economic relations before the diplomatic fallout in September 2023. Despite the political tensions, economic ties have remained relatively unaffected, primarily due to steady supply and demand dynamics and the absence of significant government actions to disrupt business relations.
Over the past decade, Canada-India two-way trade in merchandise nearly doubled, growing from C$6.4 billion in 2014 to C$12.67 billion in 2023. Contrary to expectations, the recent diplomatic strains have not significantly impacted trade so far. In fact, total two-way trade between Canada and India slightly increased from C$880 million to C$923 million from March 2023 to March 2024.
For example, in the six months before the Nijjar allegations (March-August 2023), Canadian imports from India were C$2.71 billion. This figure rose to over C$2.74 billion in the six months following the allegations (October 2023-March 2024). During the same period, Canadian exports to India saw a substantial increase of roughly 16 percent, from around C$2.6 billion to approximately C$3.1 billion.
Despite the ongoing political dispute, the economic ties between Canada and India have demonstrated resilience, without disruption in trade relations. Both nations continue to engage in substantial bilateral trade, highlighting the importance of economic interdependence even amid diplomatic challenges.