Rift with Canada sparks uncertainty over movement of people, infrastructure investments, critical minerals deal

New Delhi/Mumbai: The deepening diplomatic crisis between India and Canada could deal a blow to several key sectors, experts warned on Tuesday, 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.

Business executives expect increased visa restrictions by both countries, a deadlock in attempts to build a supply chain for critical minerals and a pause in fresh investments by Canadian pension funds already invested in India’s infrastructure projects.

Industry representatives also expect more Indian students to now opt for Eastern European countries like Poland, Georgia, Estonia and Lithuania for higher studies.

Also read | Mint Primer | The escalating India-Canada rift and its implications for India

Canadian foreign minister Mélanie Joly told reporters on Monday in response to a question about sanctions on India that expelling diplomats was one of the toughest measures that could be taken, but that Ottowa will continue to push New Delhi to cooperate in the investigation into a Sikh separatist’s killing on Canadian soil.

“Everything is on the table," she said. A statement from India’s ministry of external affairs on the same day said India reserved the right to take further steps in response to Canadian allegations that Indian diplomats were involved in the killing of Sikh separatist Hardeep Singh Nijjar in 2023.

Industry watchers believe the diplomatic friction, if not resolved soon, could lead to uncertainty in bilateral economic ties. India imports coking coal and pulses from Canada and exports pharmaceuticals.

Slowdown in visa approval

“The strained relations are expected to slow down the visa approval process from both sides, especially in the absence of the concerned authorities to handle requests. This can be viewed as a form of restriction without any official notification," said Prabhjit Singh Sodhi, a visa consultant at My Visa Guide, a consulting firm.

“The Canadian government has already extended the visa approval timeframe from the earlier one month to 105 days, which now exceeds three months. This delay will affect new visa applicants, including skilled professionals, students, and others," Singh told Mint over phone.

"We estimate about 100,000 fewer students heading to Canada in the coming year now. About 22% of our students (616 students) head to Canada while 7-10% go to the Eastern European nations," said Vaibhav Gupta, chief marketing officer, iSchoolConnect Pvt Ltd, an overseas education consultant.

Gupta predicts Poland, Georgia, Estonia and Lithuania to see a larger traction amogst students now. “We are getting calls from students and their parents on options for higher studies besides Canada."

Also read | Justin Trudeau will use the RCMP to unilaterally indict India

In January, Canada's immigration minister had noted that a reduction of 35% would lead to 364,000 approved study permits in 2024; now, a further 10% drop would mean that only 3,27,000 student permits will be issued in 2025.

“We’re granting 35% fewer international student permits this year. And next year, that number’s going down by another 10%," said Canadian prime minister Justin Trudeau said on 19 September. "Immigration is an advantage for our economy — but when bad actors abuse the system and take advantage of students, we crack down," Trudeau posted on his social media handle on X.

The cap on international students and stricter work visa rules have forced thousands of students to seek other countries at the application stage itself. The Indian government informed Parliament in April that over 1.3 million students were studying abroad in 2024.

According to a PTI report quoting government data, of the 1.33 million Indian students, 427,000 were studying in Canada, 337,630 in the US, 8,580 in China, eight in Greece, 900 in Israel, 14 in Pakistan and 2,510 in Ukraine.

Cloud to remain

Consultants said that with immigration emerging as a political issue, the cloud over higher education will remain, and the dip will continue until Canada's elections due by October 2025.

Students head abroad in two tranches - one in August-September and the other in January-February.

Over the past year, studying in Canada has become harder. The country faces an acute housing crisis, and options are limited for many foreign students.

Canada also doubled the GIC (guaranteed investment certificate) from CAD$10,000 ( ₹6 lakh) to CAD$20,635 ( ₹12 lakh) effective from 2024. A GIC is similar to a secure investment and acts as proof that the student has the means to live and pay for expenses in Canada. One can get a GIC from Canadian financial institutions.

A senior finance ministry official, however, said that major investment sources from Canada, including pension funds and remittances from the Indian diaspora, are expected to remain stable, as these funds typically invest for the long term based on India's intrinsic economic strength.

Also read | Trade may not take a hit from Canada row

"Indians abroad will continue to send money back home even if both governments are at loggerheads," the official said.

Queries emailed to the spokesperson for the ministries of finance, commerce, external affairs and home remained unanswered tillpresstime.

Some experts do not believe the movement of people between the two countries and Indian students opting for education in Canada will be impacted by the latest events.

Tensions are unlikely to spill into trade, they said, pointing out that India’s trade with China did not get impacted in spite of geo-political concerns with the neighbour. They also said India will not ask its students and citizens living in Canada to come back. “We have far more at stake in Canada than they have in our soil," an expert said on condition of not being named.

Ankit Mehra, co-founder and chief executive officer of non-banking lending firm GyanDhan said the developments add to the uncertainty on top of the visa caps, which will deter students from considering Canada.

Invested in infrastructure

Vaibhav Dange, an independent public policy and infrastructure sector expert, said government-driven pension and sovereign wealth funds from Canada have invested in infrastructure projects in India. “These investments would be in wait-and-watch mode and any fresh investments may be held back till situation is normalises,“ said Dange. He, however does not expect any immediate impact on cross-border investments.

Canada Pension Plan Investment Board (CPPIB) and Ontario Teachers' Pension Plan (OTPP) have invested a total of ₹3,640 crore ($438 million) in an infrastructure investment trust (InvIT) sponsored by the state-run National Highways Authority of India (NHAI). They continue to own 25% in the National Highways Infra Trust (NHIT).

Another immediate setback would be the partnership in critical mineral mining. Last year, then Union minister for coal and mines Pralhad Joshi had discussed stepping up cooperation in the mining sector, especially in critical minerals, with a Canadian delegation led by Ranj Pillai, Premier of Yukon, Canada. The leaders had then resolved to strengthen the supply-chain of these resources.

Also read | What led to India-Canada diplomatic row? A quick recap

India is also Canada's fourth largest market for coking coal which is in short supply in India and has to be imported to meet the steel sector’s needs. In 2023, 3.1 million tonne of coal was exported from Canada to India, showing an annual increase of 22.8%. India’s exports of iron or steel to Canada stood at $246.21 million in 2023, according to the United Nations COMTRADE database on international trade.

In FY24, India exported pharmaceuticals worth $502 million to Canada, a notch below the shipment of $506 million in the year before. “We largely export finished generic drugs used for lifestyle diseases. I don’t see any serious problem in pharma exports to Canada with this diplomatic disturbance," said Uday Bhaskar, former Director General of Pharmaceuticals Export Promotion Council of India (Pharmexcil).

India exported goods worth $3.85 billion to Canada in FY24, less than 1% of its total exports. India imported goods worth $4.55 billion, also a small share of its overall exports, official data showed.

Rhik Kundu, Gireesh Chandra Prasad and Priyanka Sharma contributed to this story.