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Why A Diplomatic Standoff With India Is Bad Business for Canada?

The ongoing India-Canada diplomatic standoff has raised eyebrows worldwide. Not only do we have two peaceful democracies pitted against each other, but it’s the economic and geopolitical repercussions that can pull the two countries further apart.

I need not tell you that for any sovereign country, diplomatic relations are a bedrock of its international posture, helping it nurture friendships and foster economic cooperation.

With the ever-rising global profile of India, it became increasingly vital for Canada to prioritize its relationship with the subcontinent.

In the year 2022, Canada-India bilateral trade reached a new high of CAD12 billion. Where India exports auto components, consumer goods, and garments to Canada, Canada exports essential commodities like coal and fertilizers to India. However, the recent standoff threatens to change everything.

On September 18th, Canadian PM Justin Trudeau dropped a bombshell by accusing the Indian government of the killing of one of its Sikh citizens. This allegation wasn’t backed up by any credible evidence though.

That said, any protracted spat between the two nations would be detrimental, especially for Canada, and here’s why.

1. India’s Expansive Reach

The Indian economy is not only robust and expansive but is also pivotal to the global economic ecosystem. And, the numbers back it up.

India’s economy, now touted as the world’s fifth-largest by nominal GDP and third-largest by purchasing power parity, is on a growth trajectory that most nations envy.

In contrast, Canada, while developed, is relatively smaller and is facing economic headwinds. Its dependency on natural resources and ongoing domestic issues, from housing crises to indigenous rights, makes its economy more susceptible to global fluctuations.

2. Student Economy

A stark manifestation of the depth of the bilateral relationship can be gauged from the number of Indian students in Canada. Last year only, India sent an unprecedented 320,000 students to Canada.

These students not only contribute a whopping CAD 3.5-4 billion annually in tuition, but they also create a bridge between the two nations. Disrupting this flow would mean a significant economic dent for Canada.

India Canada diplomatic standoff

3. Trade and More Trade

Canada’s trade relationship with India has been burgeoning. In recent years, bilateral trade has exceeded CAD 12 billion with India running a trade surplus.

From diamonds and seafood to IT services and aerospace components, the two-way trade covers a diverse range of sectors. A hiccup in diplomatic ties can jeopardize this mutually beneficial economic partnership, hitting Canadian exporters hard.

4. Historical Precedence and Lessons Learned

History has demonstrated the fallout of strained Canada-India relations. The infamous incident in the 1980s involving the bombing of Air India Flight 182 led to decades of mistrust.

The time, energy, and resources invested in mending ties after such incidents are colossal. It’s a cost Canada can’t afford repeatedly, especially given the evolving global scenario.

5. The Larger Geopolitical Picture

With the rise of China and the shift in global power dynamics, India stands as a democratic counterweight in Asia.

Alienating India would not only be an economic misstep but a strategic blunder. In the increasingly multipolar world, Canada cannot afford to isolate itself from key players.

6. The Competitive Landscape

Should Canada decide to risk its relationship with India, there are numerous nations ready to seize the opportunities

Canada leaves behind. Countries like Australia, the UK, France, and Germany are already vying for a more substantial share of the Indian student market and trade opportunities.

Canada’s slip could lead to the permanent diversion of these critical economic lifelines.

In Conclusion

Canada’s relationship with India is not merely a footnote in its diplomatic playbook but a chapter that holds significant implications for its future. As India continues to grow in stature and strength, the cost of any discord between Ottawa and New Delhi will only escalate.

It’s a simple equation: While India offers a market of over a billion people, a vibrant economy, and a strategic partnership, Canada provides expertise, natural resources, and education. Together, the synergy can be phenomenal, but apart, Canada stands to lose more.

To ensure a prosperous future, Canada must not only respect but prioritize its ties with India. Diplomatic rows are expensive, and in the case of India, the bill is one that Canada simply can’t afford.

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