A huge diplomatic row has erupted between India and Canada following Canadian Prime Minister Justin Trudeau’s allegation that India may be involved in the assassination of a Sikh extremist in his country. India not only refuted the claim but counter-alleged that Canada has been “giving space” to illegal activities such as murder and organised crime.

On Monday, Trudeau, in a parliament address, said the Canadian security agencies had been pursuing “credible allegations’’ of a potential link between agents of the government of India and the killing of a Canadian citizen Hardeep Singh Nijjar and all steps necessary to hold perpetrators of this murder to account will be taken.

In a strong rebuttal, the MEA said, “Such unsubstantiated allegations seek to shift the focus from Khalistani terrorists and extremists, who have been provided shelter in Canada and continue to threaten India’s sovereignty and territorial integrity. The inaction of the Canadian Government on this matter has been a long-standing and continuing concern”. 

Canada expelled a senior Indian diplomat on Monday following which India, too, expelled a Canadian diplomat. The incident evoked responses from countries such as the US, Australia and the UK which expressed “concern”.

Trade Ties

While some analysts are hopeful that the current stand-off between the two nations will not significantly affect the existing strong bilateral trade and investment ties, others fear that trade in items such as pulses and newsprint could take a hit, at least in the short run, till the situation gets resolved. India imports significant quantities of pulses from Canada and a fall in the pulses acreage this year has caused concern about market availability.

“In the short run the matter is unlikely to be resolved as it doesn’t appear that Trudeau will pull back due to political compulsions. It needs back channel work with the involvement of countries such as the US. The current tension could therefore affect our import of pulses as 21 per cent of our imports are from the country. Newsprint imports could also take a hit as 40 per cent of it was imported from Canada in the April-July period,” said Biswajit Dhar, Distinguished Professor, Council for Social Development.

As India-Canada trade in complementary products and do not compete on similar products, trade relationship is likely to continue unaffected by day to day events, said trade expert Ajay Srivastava. Trade between India and Canada has grown significantly in recent years, reaching US$8.16 billion in FY2023. 

Canadian pension funds, too, have invested over $45 billion in India, making it the fourth-largest recipient of Canadian FDI in the world, and are unlikely to withdraw, he said.

Though the stand-off is unlikely to adversely impact bilateral trade in goods and services, which are based on strict commercial considerations, the bilateral FTA, which has been put on hold, could have provided greater opportunities in increasing trade, believes Jayant Dasgupta, India’s former Ambassador to the WTO.

“Hopefully  the relationship would get back to an even keel soon so that the FTA negotiations can resume,” he said.