India's Canada trade holds up, but key imports slow

Trade between the two nations rose from $5.65 billion in FY21 to $8.40 billion in FY24, before the murder of a Sikh separatist in Canada cast a shadow over relations.

Still, overall trade between the two in the first five months of FY25 inched up to $3.38 billion from $3.28 billion in the same period of FY24. During the five-month period, India's exports to Canada increased from $1.57 billion to $1.66 billion, and imports from $1.71 billion to $1.72 billion. India’s top exports to Canada include gems, pharma products and textiles.

Experts said that while the diplomatic standoff did halt India's free trade discussions with Canada, bilateral trade remains largely unimpacted, except for a minor dip and free of trade restrictions.

"Both governments, respecting the WTO’s Most Favoured Nation (MFN) principle, have refrained from implementing any trade restrictions. This principle mandates equal treatment for imports from all countries, and it appears both nations are holding firm to this commitment," said Ajay Srivastava, founder of the economic thinktank Global Trade Research Initiative (GTRI), and a former trade service official.

"Trade data supports this resilience. India’s exports to Canada saw a 7% rise from $2.5 billion in January-August 2023 to $2.7 billion in the same period in 2024. Meanwhile, Canadian imports to India edged up by 0.5%, from $1.71 billion to $1.72 billion," he added.

Also read: India-Canada FTA talks unlikely to resume soon

Spokespersons of the commerce ministry Canadian High Commission in New Delhi didn't respond to emailed queries.

Trade data

During FY24, India's imports from Canada stood at $4.55 billion and exports at $3.85 billion, compared to $4.17 billion of imports and $4.11 billion worth of exports in the previous year. During the period, India's trade deficit with Canada widened from $58 million to $708 million.

India's trade with Canada, however, is only a tiny share of its overall external trade. India's total exports stood at $437.07 billion and imports at $678.22 billion in FY24, compared to $451.07 billion of exports and $715.97 billion of imports in FY23. Exports have cooled partly due to the slowdown in advanced economies and geopolitical conflicts.

The World Trade Organization (WTO) projects that global goods trade will increase by2.7% in 2024, which is slightly higher than the previous estimate of 2.6%. This is a gradual recovery from the 1.2% decline in 2023, caused by high energy prices and inflation in advanced economies.

Interestingly, trade of the top five key imports from Canada such as pulses, coal, fertilizers, pearl, pulp and waste paper slowed during the ongoing fiscal. Import of pulses, which stood at $370 million in FY23, sharply rose to $930 million in FY24. In the first five months of FY25, it stood at $266 million.

Also read: Diplomatic tensions will not disrupt India-Canada trade: Commerce secretary Barthwal

Similarly, imports of coal, coke, and briquettes from Canada have fallen since FY23, when it stood at $1.06 billion to $896 million in FY24, and $283 million during the first five months of FY25.

Fertilizer imports also fell from $710 million in FY23 to $439 million in FY24 and $164 million during 5M, FY25. Import of pulp and waste paper, which stood at $323 million in FY23, fell to $213 million in FY24, and $133 million during 5M, FY25. Iron and steel imports have also fallen from $235 million in FY23 to $246 million in FY24, and $76 million in 5M, FY25.

Halting trade talks

In June 2023, Hardeep Singh Nijjar, a 45-year-old Sikh separatist, who the Indian government had designated a terrorist in 2020, was shot dead outside a Sikh temple in Surrey, Vancouver. The killing raised tensions between the two countries, after Canada accused India of masterminding it.

Canada paused trade talks with India on September 1, 2023, citing a need to “take stock." Tensions escalated at the G20 in New Delhi, where Prime Minister Modi skipped a meeting with Trudeau in the same month. Both countries also expelled diplomats amid Ottawa’s claims of a possible Indian link to Nijjar’s murder.

On October 19, 2013, Canadarecalled 41of its diplomats from India after the Indian government said it would revoke their diplomatic immunity and security protection for their relatives.

Also read: India-Canada row: It’s failing Indian students

A year later, the Canadian government expelled six Indian diplomats after identifying them as persons of interest in the Nijjar case.

India dismissed the accusations and ordered Canada’s acting high commissioner and five other diplomats to leave.

Mint had on 16 October reported that the deepening diplomatic crisis between India and Canada could deal a blow to several key sectors, listing Indians travelling to the North American country for education and work, a growing partnership in strategic critical minerals, Canadian investments in Indian infrastructure and trade in certain goods.