India-Canada diplomatic row: No impact on bilateral trade in goods so far

The diplomatic tensions between India and Canada have so far not impacted the bilateral trade in goods between the two countries, think tank GTRI said on Monday.

However, it added that as this dispute drags on, both nations will need to carefully manage their actions to avoid a full-blown economic fallout.

The bilateral merchandise trade between India and Canada actually grew slightly from $8.3 billion in 2022-23 to $8.4 billion in 2023-24.

India's imports from Canada increased to $4.6 billion, while exports saw a marginal dip, falling to $3.8 billion.

"These figures suggest that, at least for now, economic ties remain stable, unaffected by the diplomatic storm brewing in the background," it said.

"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," Global Trade Research Initiative (GTRI) Founder Ajay Srivastava said.

India on Monday announced withdrawing its high commissioner and other "targeted diplomats and officials" from Canada after strongly dismissing Ottawa's allegations linking the envoy to an investigation into the killing of Sikh extremist Hardeep Singh Nijjar, in a major downturn in already frosty ties between the two nations.

India's decision came shortly after the Canadian Charge d'Affaires Stewart Wheelers was summoned to the Ministry of External Affairs (MEA) and was told bluntly that the baseless "targeting" of Indian High Commissioner Sanjay Verma and other diplomats and officials was "completely unacceptable".

Srivastava said that India's decision to withdraw its High Commissioner from Canada marks an escalation in the diplomatic tensions that began in September 2023.

The strain started when Canadian Prime Minister Justin Trudeau accused India of involvement in the killing of a Canadian citizen and Sikh separatist leader.

This allegation led to a back-and-forth expulsion of diplomats and paused Free Trade Agreement (FTA) talks.

"Despite these significant political frictions, the on-ground impact on trade between the two countries has been minimal. This is largely because trade happens at the private-sector level, and neither India nor Canada has introduced regulations that restrict the flow of goods or services," he said.

In other words, while diplomatic relations may have soured, businesses on both sides have continued to engage, insulated from the political noise, he added.

India has received $4 billion foreign direct investments from Canada during April 2000 and June 2024.