As diplomatic relations between India and Canada have experienced rising tensions, industry experts and political analysts maintain a sense of cautious optimism. Despite Canada’s decision to withdraw 41 diplomats from India in response to concerns over the threat of India stripping them of diplomatic immunity, many believe that the diplomatic row is unlikely to significantly impact trade, investment, or bilateral relations between the two nations.

The situation revolves around the alleged killing of Hardeep Nijjar, a member of the Khalistani movement, and has the potential to strain bilateral ties. However, analysts emphasize the robustness of economic and trade bonds that have been carefully nurtured over the years, which they believe will endure the current political turmoil.

While acknowledging the need for mending relations between the two nations, experts suggest that the “ball is in Canada’s court.” India is on track to become the world’s third-largest economy by 2027 or 2030, with a projected GDP surpassing $5 trillion, underlining India’s position in the new global order.

The potential impact will be more pronounced if the situation continues for an extended period. Experts envision a scenario in which Canadians of Indian origin are less likely to visit India, and Indian students are less likely to study in Canada if the current diplomatic conflict is not resolved.

Despite being important for India’s market, trade with Canada accounts for less than 1% of India’s total trade. The share has remained at this level for the past five years. The recent diplomatic rift may affect sentiment in the short term, but it’s not expected to have a long-term negative impact.

Canadian companies have substantial investments in Indian companies and are unlikely to exit these positions in the near future. Despite short-term challenges, experts believe the economic and trade bonds between India and Canada will ultimately withstand the political tensions.

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