India-Canada Relations and the Khalistan Issue- Concerns and Way Forward- Explained Pointwise

India’s expulsion of six Canadian diplomats and withdrawal of its High Commissioner marks a significant rise of tensions in India-Canada relations. This diplomatic fallout raises concerns over potential economic impacts, including the $75 billion Canadian pension fund investments in India, the stalled trade agreement negotiations, and remittance flows from Canada.

One of the prominent reasons for the deterioration of India-Canada relations has been the Khalistan movement, which seeks to establish a separate Sikh state in India. This issue has become particularly pronounced following the assassination of Hardeep Singh Nijjar, a Khalistani leader, in Canada, which Canadian Prime Minister Justin Trudeau attributed to Indian government agents. India has vehemently denied these allegations and accused Canada of harbouring Khalistani extremists, leading to a severe diplomatic rift between the two nations.

What is the history of India Canada Relations?

What are the concerns with the recent diplomatic fallout between India-Canada?

1. Impact on India Canada FTA- The diplomatic rift has stalled discussions on a Comprehensive Economic Partnership Agreement between India and Canada, which was previously seen as a pathway to enhancing trade ties.

2. Impact on India Canada Trade Relations- Canada contributes to around 1% to India’s trade, and also accounts for 25% of pulses and 5% of fertilizer imports. The recent fallout endangers the bilateral trade between the two countries.

3. Impact on Canadian Investment in India- From 2020 to 2023, Canada was the 18th-largest foreign investor in India, contributing $3.31 billion. Canadian pension funds, like the Canadian Pension Plan Investment Board (CPPIB) and Caisse de dépôt et placement du Québec (CDPQ), have invested over $75 billion cumulatively. These funds hold stakes in major Indian companies like Kotak Mahindra Bank, Paytm, Zomato, and Infosys, viewing India as a prime investment destination. The recent fallout creates uncertainities around Canadian Investments in India.

4. Impact on Indian Remittances- India, the world’s largest recipient of remittances, received $125 billion in 2023, with Canada among the top 10 sources. In 2021-22, Canada contributed 0.6% of India’s remittances.

5. Impact on mobility of Indian Students- Canada is a key destination for Indian students, with about 427,000 Indian Students studying in Canada. There are concerns of mobility of students for studies in Canada.

What is the Significance of India-Canada Relations?

1. Cooperation in Indo-Pacific- Canada’s Indo-Pacific Strategy has listed India an important partner in the Indo-Pacific region. It has marked out China as an “increasingly disruptive global power”, while referring to India as a “critical partner” with shared traditions of democracy and pluralism.

2. Trade and commerce – India is Canada’s tenth-largest trading partner. Bilateral trade between India and Canada stands at USD 5 billion. More than 400 Canadian companies have a presence in India and more than 1,000 companies are actively pursuing business in the Indian market. Canadian pension funds have pledged over USD 55 billion in investments between 2014 and 2020. Canada and India are working toward a Comprehensive Economic Partnership Agreement and a Foreign Investment Promotion and Protection Agreement (FIPA).

3. Development Cooperation- Canada has invested nearly $24 million in 2018-2019 to support 75 projects in India through its Non profit organisations like Grand Challenges Canada.

4. Energy sector – India and Canada signed a Nuclear Cooperation Agreement (NCA) in 2010 for which a Joint Committee on Civil Nuclear Cooperation was constituted by both the countries. Uranium supply deal has been signed during PM Modi’s visit in 2015.

5. S&T and Space- ISRO and CSA (Canadian Space Agency) have signed MOUs for cooperation in the field of exploration and utilisation of outer space. ANTRIX, the Commercial arm of ISRO, has launched many Canadian Satellites.

6. Education Sector- Since 2018, India has been the largest source country for international students in Canada. This has helped Canadian universities and colleges to provide subsidised education to domestic students.

7. Indian Diaspora- Canada hosts one of the largest Indian diaspora in the world numbering 1.6 million (PIOs and NRIs) which account for more than 3% of its total population. The diaspora has done commendably well in every sector in Canada. In the field of politics, the present House of Common (total strength of 338) has 22 Members of Parliament of Indian-origin.

What are the other challenges in the Relations between the two countries?

1. Khalistani separatist factor- It is the single most important challenge between India and Canada. The Canadian government’s Policy of balancing the Sikh assertions and its relations with India, has jeopardised the India Canada Relations.

2. Attacks on Indian Consulates and Indian Diaspora- The attacks on Non-Sikh Indian Diaspora, Indian Consulates and Temples have further strained the India Canada Relations.

3. Trade Challenges- Structural impediments such as complex labour laws, market protectionism, and bureaucratic regulations have been roadblocks for Indo-Canadian trade relations. Bilateral agreements, such as the Comprehensive Economic Partnership Agreement (CEPA) and Investment Promotion and Protection Agreements (BIPPA), have been in negotiation for long time and no progress has been reached by both the countries. Before the G20 summit, the Canadian government independently halted trade negotiations with India. All these have contributed to low Indo-Canadian trade.

4. Close relationship of China and Canada- There is a close relationship between the current federal government of Canada and the Chinese Communist Party’s government. This has also strained India-China relation.

What Should be the way forward?

In recent times, Government of India has effectively conveyed to Canada that they cannot simultaneously have good relations with India while allowing anti-India separatist movements on their soil.

1. Constructive and Sustained Engagement- India will have to build a constructive and sustained engagement with the Sikh diaspora, dispel the misinformation propagated by the Khalistani separatists and showcase the sense of contentment prevailing in Punjab.

2. New Framework of Cooperation- There is a need to develop a new framework of cooperation that is more pragmatic and that emphasises on mutually beneficial areas, such as trade, energy, infrastructure and transport, for better Indo-Canadian relations.

3. Dehypenation- India and Canada must dehypenate their political contestations over the Khalistan issue and their trade and investment relations. Both the countries must look to be back on the trade negotiations table back soon to finalise the Free Trade Agreement (FTA) between the two countries.

4. Civil Society and Track II Diplomacy- India and Canada must encourage civil society organisations and Track II diplomacy initiatives to foster people-to-people connections, dialogue, and conflict resolution efforts.

5. Media and Public Diplomacy- Promotion of responsible reporting to ensure that media coverage and public discourse accurately reflect the complexities of the relationship and the efforts being made to strengthen it.