After a bombshell allegation from Canadian officials that Indian government agents were linked to a campaign of murder and extortion in Canada, diplomatic relations have reached a new low. This escalating tension is raising concerns about its potential impact on the strong trade and immigration ties between the two countries. Bilateral trade is valued in the billions, and nearly 1.7 million people of Indian descent live in Canada.
The current situation is unprecedented, leaving uncertainty about the future course of action for both nations. While neither country has imposed economic sanctions, experts warn that this could change, potentially affecting economic growth. According to Arif Lalani, a senior advisor at StrategyCorp and former Canadian diplomat, “The biggest challenge, particularly for business and citizens, is going to be uncertainty.”
The two countries have been negotiating a trade deal intermittently for over a decade, but Canada paused discussions last year, shortly before Prime Minister Justin Trudeau made his initial public accusation against India. In September 2023, Trudeau stated that “credible allegations” connected Indian agents to the murder of Sikh separatist Hardeep Singh Nijjar, who was shot dead in Surrey, British Columbia, in June. India briefly halted visa issuance for Canadians in response but resumed in November.
Trade relations remained steady, with bilateral trade valued at around $8 billion. Recently, Canada’s trade minister reassured businesses that Ottawa does not seek to disrupt commercial ties. However, Lalani noted that business owners might reconsider expanding trade or pursuing existing ventures.
The diplomatic standoff also poses concerns for the movement of people between the two countries. India has been the leading source of international students to Canada since 2018, and about 4% of Canada’s population is of Indian origin. Delhi-based lawyer Karan Thukral, whose clients are keen to move to Canada, said many are now worried about the potential impact on their plans. While immigration processing continues, Thukral advised his clients to prepare for delays due to a reduced diplomatic staff in both countries.
Jeff Nankivell, president of the Asia Pacific Foundation of Canada, warned that visa restrictions could harm trade, tourism, and investment. He pointed out that India had already temporarily suspended visas for Canadians once, indicating it could happen again, especially impacting Canada’s large Indian diaspora.
As Canadian authorities continue to pursue legal action against those allegedly involved in Nijjar’s murder and other crimes, Nankivell suggested that the diplomatic relations would likely evolve and its repercussions persist. Four Indian nationals have been arrested in connection with Nijjar’s murder, but their ties to the Indian government remain unclear.
Amid these developments, Prime Minister Trudeau reiterated accusations of India’s interference in Canada’s sovereignty, while also emphasizing the importance of maintaining economic and social ties. In response, India called Trudeau’s stance “cavalier” and accused Canada of failing to provide evidence. Both countries have signaled that further measures could be taken, with Canada considering all options, including sanctions.
