G7 Summit: India, Canada re-engage, revive trade talks after 2 years

India-Canada ties plummeted to an all-time low in the aftermath of a diplomatic spat over the killing of Khalistani separatist Hardeep Singh Nijjar in June 2023

India and Canada on Wednesday decided to take “calibrated” and “constructive” steps to reset their relationship and restore stability in bilateral ties. As a first move, the two sides agreed to resume negotiations on an interim trade agreement after a nearly two-year pause and to appoint new high commissioners to each other’s capitals.

 

Indian Prime Minister Narendra Modi and his Canadian counterpart Mike Carney met on the sidelines of the G7 Summit in Kananaskis, Alberta, where they also agreed to restart senior ministerial and working-level engagements across various domains to “rebuild trust” and “bring momentum” to the relationship, said the Ministry of External Affairs (MEA). The Canadian government said the early return of high commissioners was aimed at serving citizens and businesses in both countries.

 

It was Modi’s first in-person meeting with Carney, who retained office after Canada’s recent general elections.

 

India-Canada ties deteriorated  following the June 2023 killing of Khalistani separatist Hardeep Singh Nijjar, with then Canadian Prime Minister Justin Trudeau alleging a potential Indian link to the case. In October, India recalled its high commissioner and five other diplomats after Canadian authorities suggested their involvement. India also expelled an equal number of Canadian diplomats. Against the backdrop of a thaw in relations following Carney’s election in March, the two leaders reaffirmed respect for the rule of law and their commitment to upholding the “principles of sovereignty and territorial integrity”.  

 

“The leaders also discussed the importance of restarting the stalled negotiations on the Early Progress Trade Agreement (EPTA), with a view to paving the way for a Comprehensive Economic Partnership Agreement (CEPA). They agreed to task their respective officials to engage further in this regard,” the MEA said. Modi and Carney agreed to direct their respective officials to begin discussions for an interim trade deal, which will be followed by a comprehensive agreement.

 

India and Canada had formally re-launched CEPA talks in March 2022 to boost trade and investment flows. The EPTA was to serve as a transitional step toward the comprehensive pact. 

 

Talks were suspended in September 2023 amid political tensions, even though negotiations were at an advanced stage and both sides had hoped to conclude the agreement by year-end. Despite the strain, India’s exports to Canada remained strong, reaching $4.2 billion in FY25, a 9.8 per cent increase year-on-year. Major exports included medicines, garments, diamonds, chemicals, gems and jewellery, seafood, engineering goods, rice, and electrical equipment. Canada accounted for less than 1 per cent of India’s total exports.

 

Imports from Canada fell 2 per cent to $4.4 billion in FY25. India’s dependency on Canadian imports remains low at 0.6 per cent of total inbound trade, primarily comprising pulses, crude oil, fertilisers, aircraft and aviation equipment, diamonds, and bituminous coal.

 

The MEA said the Modi-Carney meeting provided both sides an opportunity for frank and forward-looking discussions on the relationship and next steps. The leaders expressed a desire to pursue a “constructive and balanced” partnership grounded in mutual respect for each other’s concerns and sensitivities, bolstered by strong people-to-people ties and economic complementarities.

 

They also discussed future cooperation in clean energy, digital transformation, artificial intelligence, LNG, food security, critical minerals, higher education, mobility, and supply chain resilience. The leaders reaffirmed their shared interest in promoting a free and open Indo-Pacific, the MEA said.