The unrealised potential of the India Canada partnership


Justin Trudeau’s foolish parliamentary antics have hampered a promising partnership of nations that have the potential to grow as trade and cultural partners. Clearly, the Canadian PM lacks a smart Foreign affairs committee and a solid team of advisors, that could make him realize he just shot himself in the foot. The bumbling premier seems to have learnt little from the misadventures of his father and might repeat the glaring mistakes that have stained Canada’s political history and its security narrative.

Following New Delhi’s issuance of a safety advisory there is a possibility that Indian students might not consider Canada as their destination for higher education. This possible shift in student preferences could impact the education sector that contributes about C$22 billion ($16.3 billion) in annual revenues to Canada.

Indian students play a significant role in contributing to the Canadian economy in many ways. Indian students pay tuition fees to Canadian universities and colleges, which are often higher for international students compared to domestic students. This influx of tuition fees constitutes a substantial source of revenue for Canadian educational institutions.

These students spend money on various goods and services in Canada, including accommodation, food, transportation, and entertainment. Their spending stimulates local economies and supports businesses in the vicinity of educational institutions.

Universities and colleges hire faculty, administrative staff, and support personnel to accommodate the growing student body. Additionally, the increased demand for services, such as housing and dining, leads to employment in various sectors.

Indian students often engage in research activities during their academic programs. Their contributions to research projects not only enhance the quality of research but can also lead to innovations and discoveries with potential economic benefits.

Many Indian students choose to stay in Canada after completing their studies, contributing to the Canadian workforce. Indian students who remain in Canada for employment and possibly pursue permanent residency continue to contribute to the Canadian economy over the long term. They pay taxes, invest in real estate, and participate in various economic activities.

Canada, like many other developed nations, is experiencing a demographic shift characterized by an aging population. This means that a significant proportion of its citizens are reaching retirement age, and the birth rate is not sufficiently high to replace the retiring workforce. As a result, there is a growing gap between the number of people leaving the labor force (retirees) and those entering it.

For any economy to thrive and maintain sustainable economic growth, it needs a healthy and growing labor force. A shrinking or stagnant labor force can pose several challenges, including labor shortages, reduced economic productivity, and increased pressure on social welfare programs.

Canada has recognized the need to address the challenges posed by an aging workforce, and immigration has emerged as a key solution. According to the most recent 2021 census reports compiled by Statistics Canada, approximately 23% of Canada’s population comprises immigrants.

Furthermore, these reports indicate that over 62% of the newly arrived immigrants originate from Asia, predominantly from India. In a noteworthy development, this marks the first instance where India has claimed the highest share, accounting for 18.6% of the immigrant population.

On the other side, India’s access to Canadian potash, a critical nutrient for agricultural crops, faces disruption. Potash primarily in the form of potassium chloride (KCl), is a vital component in fertilizers, enhancing crop yields and ensuring food security.

India, being one of the world’s largest agricultural producers, relies on potash imports to meet the nutrient requirements of its crops since it does not possess significant domestic reserves of this essential nutrient. Canada is one of the world’s leading exporters of potash, and Indian agriculture depends on a steady and reliable supply of Canadian potash to maintain agricultural productivity.

A break down in trade ties might lead to increased prices for potash in the Indian market and reduce crop yield. This could impact food prices for consumers and the profitability of farmers.

Furthermore, India seeks to establish itself as a global pharmaceutical powerhouse. It is already known for producing high-quality and cost-effective medicines. When it comes to exports to Canada, pharmaceuticals play a crucial role, contributing significantly to the bilateral trade relationship.

During the COVID-19 pandemic, India played a pivotal role in supplying essential pharmaceutical products, including vaccines, to Canada. This collaboration highlighted the importance of the pharmaceutical sector in addressing global health crises.

Iron and steel products are another significant category of Indian exports to Canada. These products are essential for various industries, including construction, manufacturing, and infrastructure development. Gems and jewelery, electrical machinery and organic chemicals are some of the other exports from India to Canada. The grinding halt to trade talks between the two nations is likely to affect all these sectors.

Although Canada’s share in FDI inflows into India is minuscule, it was likely to grow substantially over the years, given the potential of the Indian economy. The current gloomy outlook on their relationship is unfortunate for both nations.

India and Canada have established a Comprehensive Economic Partnership Agreement (CEPA) with the objective of enhancing trade and investment within the technology sector. Within the framework of this agreement, both nations have pledged to lower tariffs and address non-tariff barriers in the trade of technology-related goods and services, encompassing areas such as information technology, electronics, and telecommunications. Additionally, the CEPA encompasses provisions for collaborative efforts in the realms of digital innovation and support for startup ventures.

In recent years, India has sought to position itself as an alternative to China as a global supply-chain hub. The ongoing tensions in the India-Canada relationship threaten to disrupt this strategy. A trade deal with Canada could have been a crucial step in enhancing India’s role as a reliable supply-chain partner.

Similar in value of export-import relationships, India and Canada so far enjoyed a promising economic partnership, with over 600 Canadian enterprises, including prominent names like Bombardier and SNC Lavalin, maintaining significant operations in India.

Conversely, more than 30 Indian companies, including major IT players such as TCS, Infosys, and Wipro, have made substantial investments totaling billions of dollars in Canada. These investments have not only strengthened economic ties but have also led to the creation of numerous job opportunities in both countries. One wonders how the current stand-off will affect these corporates, employees and their plans for further expansion.

It is unfortunate that Canada has chosen to become a safe haven for terrorists and anti-India activities. Although both countries stand to lose, this nose-dive in relationships brought on by Trudeau’s short-sightedness is going to hurt Canada much more than India. His choice of political appeasement over economic ties is likely to end badly not just for him but for Canadians in general.

Priyanka Mishra has worked as an investor, thought leader and advisor for Stanford Seed, Ivycap Ventures, Lead Angels and Endiya Partners. She is a keen Geo political observer and has previously been an advisor to Canadian women entrepreneurs wanting to expand their businesses to India through the inter-governmental Canada India Acceleration Program.