Canada dispute will not affect trade. today news

New Delhi’s relations with Ottawa hit a new low on Monday after the latter recalled some of its diplomats from Ottawa and expelled some Canadian diplomats from the country. India withdrew its envoy and some other diplomats after Canada designated some of them as “persons of interest” in the investigation into the killing of Khalistan activist Hardeep Singh Nijjar, with New Delhi calling the move “absurd.” ” and said to be part of the Trudeau government’s vote bank. Politics.

Canadian diplomats have been asked to leave India on or before 11:59 pm on October 19, the Ministry of External Affairs (MEA) said. Meanwhile, a AP Ottawa expelled Indian diplomats after uncovering evidence of “ongoing violent criminal activity” involving the Indian government, the report quoted a Canadian official as saying.

Experts say that while the withdrawal may be more symbolic without impact on trade and investment, efforts to ease tensions will be important to strengthen trade and economic ties.

“Canadian investment in India, particularly through Canadian pension funds and other investments, is relatively small. Moreover, businesses invest in such markets where they get good returns. Therefore, political differences between the two governments are unlikely to impact investment,” said an Indian government official, requesting anonymity.

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Canadian pension funds have invested more than $45 billion in India, making it the world’s fourth-largest recipient of Canadian foreign direct investment (FDI) by the end of 2022. Top sectors for Canadian pension fund investments in India include infrastructure, renewable energy, technology. and financial services.

Canada is one of the largest producers of potash, which is primarily used in fertilizers and is important to India’s agricultural sector, and is one of the largest exporters of pulses to India.

“It is too early to predict the impact on trade of pulses, especially lentils and yellow peas. However, any change in policy by the Indian government could significantly impact the import of pulses from Canada,” said Bimal Kothari, president, India Pulses and Grains Association (IPGA). “This is more a political development than an economic one. If strained relations escalate, India has the option of importing pulses from Australia,” Kothari said.

Even before relations soured last year, trade with Canada remained a relatively small part of India’s overall trade. India’s total merchandise exports in value terms were $437.07 billion, while imports were $678.22 billion in FY2014. In comparison, India’s merchandise exports to Canada during FY24 stood at $3.85 billion, while merchandise imports stood at $4.55 billion, while in value terms, exports during FY23 stood at $4.11 billion and imports at $4.17 billion.

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India’s top exports to Canada include pharmaceuticals, gems and jewellery, textiles and machinery, while Canada’s top exports to India include pulses, lumber, pulp and paper and mining products.

“Despite these significant political differences, the impact on the ground on trade between the two countries has been minimal. Ajay Srivastava, founder of the Global Trade Research Initiative, said the main reason is that trade happens at the private sector level and neither India nor Canada have introduced rules that restrict the flow of goods or services.

“In other words, even though diplomatic relations have soured, the businesses of both sides remain connected, independent of the political noise,” Srivastava said.

The proposed free trade agreement (FTA) talks between India and Canada are stalled after Canada halted the talks in September 2023 due to political concerns.

A spokesperson for the Commerce and Industry Ministry did not respond to emailed queries.

“This is a clear example of rapidly deteriorating relations between India and Canada. Hopefully, Canada will now get the message that India means business and Canada’s support and even promotion of terrorist activities cannot go unchecked,” said Chief Economist of Infomerics Ratings and former Canara Bank Chief Economist Manoranjan Sharma said.

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“Bitterness and acrimony between the two countries are bound to increase,” he said.

By Monday evening, Canadian chargé d’affaires Stewart Wheeler was summoned to the Foreign Ministry and told that the “baseless targeting” of the Indian envoy was “completely unacceptable”. Wheeler was further informed that India had decided to withdraw the High Commissioner and other targeted diplomats and officials because “the actions of the Trudeau government have jeopardized their security in an environment of extremism and violence”, the ministry said. .

“We have no confidence in the current Canadian government’s commitment to ensuring their safety,” the ministry said of the decision to recall the diplomats.

Rezaul H. Laskar and Anirudh Bhattacharya contributed to this story.