With diplomatic tensions escalating between India and Canada, the trade relations between these two global economic powerhouses takes centerstage.
Although Canada ranks as the world's ninth largest economy and India as the fifth largest in terms of GDP, it is the services that take precedence over merchandise trade, and significant potential for growth exists in both sectors.
While Canada ranks 31 in merchandise exports from India, it ranks 30 for imports.
In the current fiscal, between April and July 2023, exports to Canada amounted to $1.2 billion, making up 0.9% of all merchandise exports. This was 20% lower than a year ago amid a broader decline in merchandise exports because of the global slowdown.
Imports, too, have been easing. Between April and July 2023, merchandise imports from Canada fell to $1.4 billion, 6.4% lower than imports over the same duration a year ago. Imports from Canada made up 0.6% of all merchandise imports.
Pharmaceutical products made up the largest export component to Canada at $133 million between April and June 2023.
While there are concerns regarding the impact of the fallout on foreign trade so far, differences between both nations are largely political and are expected to subside, said Arun Garodia, chairman, Engineering Export Promotion Council. "Even though exports to Canada are limited, every dollar earned is business."
While India is hungry to export more, Canada too is facing multiple issues and attempts to diversify because of its 'China plus one' policy, Garodia said. According to him, both economies have huge potential to ramp up bilateral trade.
Bilateral services growth between both economies stood at 8.9 billion Canadian dollars in 2022, according to government estimates.
In a joint statement by the governments of both countries earlier this year, ministers from India and Canada highlighted the contribution of the services sector to furthering the bilateral relationship and noted the significant potential for increasing bilateral services trade.
Union Minister of Commerce and Industry Piyush Goyal and Mary Ng, Canadian Minister of International Trade, said that the trade-related strengths of India and Canada are complementary and that real potential exists for trade in both goods and services to expand significantly in both traditional and emerging sectors.
With that goal in mind, the ministers called for boosting the commercial ties between the two countries through enhanced cooperation and by forging partnerships to take advantage of the complementarities in such sectors as agricultural goods, chemicals, green technologies, infrastructure, automotive, clean energy, electronics, and minerals and metals.
Currently, the India-Canada FTA negotiations have been paused, and progress is expected only after existing issues are settled. After being relaunched in March 2022, nine rounds of negotiations for the India-Canada Comprehensive Economic Partnership Agreement were held till July.
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