India and Canada’s trade relationship is proving to be surprisingly resilient in the face of growing diplomatic tensions. In 2024, bilateral trade in goods reached CA$11.36 billion (₹69,368 crore), marking a slight increase from 2023. While this growth might suggest economic stability, a deeper look reveals a relationship that is more fragile than it appears.
Stable Trade, Shaky Foundations
At first glance, the numbers suggest that business is continuing as usual. A 64% rise in trade volume since 2020 is no small feat, and the exchange of goods—from Indian medicaments and jewelry to Canadian coal and lentils—continues unabated. However, these figures mask an underlying reality: trade stability does not equate to a strong, forward-moving partnership.
Political trust between the two nations has eroded significantly. Canadian Prime Minister Justin Trudeau’s public allegations about Indian involvement in the assassination of Khalistani figure Hardeep Singh Nijjar marked a significant turning point in 2023. Diplomatic expulsions followed, and trade negotiations—particularly the Early Progress Trade Agreement (EPTA)—were swiftly put on hold. This was not a temporary setback but an indicator of a relationship in distress.
The Illusion of Economic Isolation from Politics
While experts argue that both governments have deliberately insulated trade from political fallout, this strategy has limits. Trade is not conducted in a vacuum. Ottawa’s decision to pause trade negotiations was not an isolated event but a reflection of broader strategic recalibrations. Businesses operate in an environment shaped by diplomacy, and uncertainty in political relations can have long-term economic consequences.
Moreover, sub-national engagements—such as visits by delegations from Alberta and Saskatchewan—may offer a short-term buffer but cannot compensate for a lack of federal-level trust. Canada is now reassessing its economic alliances, especially given U.S. President Donald Trump’s aggressive trade policies. This shifting geopolitical landscape could force Canada to deprioritize economic ties with India in favor of more politically secure partnerships.
A Future of Stagnation Rather than Growth?
The so-called “moderate increase” in trade does not mask the reality that this relationship is stagnating. Without a trade agreement, businesses in both countries lack a framework for deeper engagement. Investments and joint ventures that require long-term policy stability are unlikely to flourish in an environment of diplomatic uncertainty.
For India, Canada remains a relatively minor trade partner, with the European Union, the United States, and Southeast Asia offering more lucrative alternatives. For Canada, trade with India—while growing—remains overshadowed by its economic reliance on the U.S. and China.
If political tensions persist, this uneasy status quo could easily slip into decline. While trade figures may not yet reflect a fracture, the lack of meaningful progress suggests that economic ties are merely surviving rather than thriving.
Conclusion: A Relationship Running on Momentum
The India-Canada trade relationship appears stable, but this stability is deceptive. Political tensions have already derailed trade negotiations, and without policy-level trust, the long-term prospects for deeper economic engagement are weak. The illusion of resilience might hold for now, but without diplomatic repair, stagnation—or even deterioration—may be inevitable.