India-Canada relations tearing at the seams

A diplomatic crisis between India and Canada escalated a week after the G20 in New Delhi following Canadian prime minister Justin Trudeau’s claims there were “credible allegations” that the Indian government was linked to the assassination of the Sikh separatist leader Hardeep Singh Nijjar in Vancouver on June 18.

India’s public response was that the allegations were “absurd” yet on Thursday stopped issuing visas for Canadian citizens, which count 2.1 million Sikhs as Canada is home to one of the largest Indian diasporas, and according to New Delhi, harbours separatist terrorists. India also ordered Ottawa to remove its diplomats from the country. Earlier on Thursday, Canada’s foreign ministry had already announced the withdrawal of its diplomats over safety concerns.

India’s stance, and the line towed by its media, is that Canada’s Prime Minister, Justin Trudeau, has allowed subversive forces to operate against India within his country. On September 16, Indian media reported that New Delhi suspended free-trade negotiations with Canada due to Ottawa’s alleged encouragement of separatists conducting anti-India activities on its soil.

Discussions on a comprehensive free trade agreement (FTA) between Canada and India have come to a grinding halt as a result. The bilateral goods trade between the two democratic, and supposedly allied countries amounted to $8 billion in FY23, with exports and imports nearly balanced. Official data reveals that in 2022-23, India exported goods such as pharmaceuticals, telecom equipment, textiles, iron, and steel valued at $4.11 billion to Canada and imported items such as coal, fertilizer, pulp, and aluminium worth $4.17 billion.

The two nations had been negotiating an interim Indo-Canada Early Progress Trade Agreement (EPTA), which could eventually lead to a Comprehensive Economic Partnership Agreement (CEPA) or an extensive FTA. Since the relaunch of FTA negotiations in March 2022, nine rounds of negotiations took place until July of that year.

Canadian Pension Funds have collectively invested more than $55 billion in India, according to official data, and over 600 Canadian companies have an established presence in the Asian nation. The diplomatic row is expected to affect Canada more than India, the world’s fifth largest economy, with observers suggesting New Delhi holds the cards.

The fallout is likely to be felt well beyond the two countries’ diplomatic and trade relations as India was increasingly seen as a strategic ally and alternative to China for Western countries, namely the United States and the United Kingdom, both of which have abstained from commenting publicly beyond expressing their “deep concern” about the allegations.

The US, UK, Australia, New Zealand, and Canada share intelligence under an agreement known as “Five Eyes” and are privy to the findings that led Trudeau to drop the bombshell accusatory statement towards India. As the saga unfolds, all eyes are on India and the Five Eyes and their balancing act between principle and a longer-term strategy.