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How Canada’s Rising Tension with India Will Affect Businesses

Canadian-Indian relations are under strain in the wake of the killing of a Sikh leader in Canada. Canada has accused the Indian government of orchestrating the assassination of a Canadian citizen who supported a separatist cause.

Hardeep Singh Nijjar was born in the Indian state of Punjab and moved to Canada in the mid-1990s. Upon first coming to Canada, Nijjar worked as a plumber, married, and had two children. In 2015, he obtained his Canadian citizenship, and in 2020, he became president of a Sikh temple in British Columbia.

Nijjar, a self-proclaimed Sikh nationalist, regularly rallied for a referendum in Canada to support the establishment of a separate nation from Punjab. Canada’s prime minister told lawmakers that agents from the Indian government have been linked to his killing. 

As a result, a sharp escalation of conflict has caused India to suspend Canadian visa applications. Behind the plunge in relations are several consequences that threaten to hurt trade and investment between the two countries and take a toll on businesses nationally.

The Impact on Trade 

Recent reports reiterated that both countries declared that they would pause trade talks with each other. The Indo-Pacific trade agreement pitched by Canada has been put on hold permanently. The trade deal fosters a larger comprehensive partnership between Canada and India. 

The stalled negotiations have put on hold a $ 17 billion bilateral deal between the two countries. Canada has a growing stake in trade with India. Since 2012, Canadian merchandise trade with India grew from $3.87 billion to $10.18 billion in 2022. 

India is Canada’s 14th largest export market and 13th largest trading partner overall. Canada exports fossil fuels, among other products like fertilizers, wood pulp, and plant fibres. India also depends on Canada to supply it with potash and regularly buys a large amount of the crop nutrient from Canada.

India exports pharmaceuticals and iron and steel products to Canada. The rising tension between the two countries led to the cancellation of the bilateral meetings at the G-20 summit and impacted business and trade between the two nations.

Canadian provinces like Saskatchewan depend on exports to India. In 2022, Canada sent $5.3 million worth of goods to India, which amounted to 0.7 per cent of global exports, according to Statistics Canada. While the long-term impact of the situation remains unknown, many business enterprises and joint financial ventures in Canada and India are impacted.

More than 600 Canadian companies, including Bombardier and SNC Lavalin, have a strong presence in India. More than 30 Indian companies, such as Infotech and others who have invested billions of dollars in Canada, will also be affected, causing the loss of jobs and impacting workers. 

Higher Education and Colleges

Canadian colleges and higher education institutions are bracing for a decrease in the number of international students from India. Undoubtedly, this means loss of business as more Indian students set their sights on other countries to pursue a degree.

Indian students make up for around 40 per cent of the foreign student population in Canada. Students from India do not only pay for tuition fees but also contribute to the country’s economy through rent and other spending.

Canada’s Auditor General Bonnie Lysyk said that this would put educational institutions across Ontario in a precarious position, impacting the province’s colleges, which depend on the high international student tuition fees to stay afloat. 

Compared to the United States, Canada is still the destination of choice for many students from India. Higher education contributes significantly to the Canadian economy, amounting to more than 15 per cent of Canada’s services exports annually. Data by Global Affairs Canada shows that international students contributed to 1.3 per cent of Canada’s gross domestic product in 2019 alone. 

With the Indian government directing Canada to downsize its consular and diplomatic staff to match India’s in Canada, processing visas for students could take longer, prompting students to look elsewhere. 

Jeff Nankivell, President and CEO of the Aisa Pacific Foundation of Canada, told BNN Bloomberg that the stalled relationship between the two countries and the suspension of visas could risk impacting a major source of funding for Canadian colleges and universities.

“That has implications not just for colleges and universities and private professional schools but also for communities across the country,” Nankivell said. 

David Messiha | Staff Writer 

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