India and Canada agreed to formally resume talks on an ambitious Comprehensive Economic Partnership Agreement (CEPA) as Prime Minister Narendra Modi and his Canadian counterpart Mark Carney met on the sidelines of the G20 leaders’ summit in Johannesburg on Sunday. The development underscores the continued improvement in relations between the two countries.
After the Modi-Carney meeting, Canadian Foreign Minister Anita Anand said Monday that Canada and India would move quickly on a trade deal, marking a shift in relations after two years of strained relations, according to the Associated Press.
Read also | India and Canada agree to start talks on Comprehensive Economic Partnership
Anand noted that Ottawa has a new foreign policy in response to U.S. President Donald Trump’s trade war and highlighted Carney’s goal of doubling non-U.S. trade within 10 years.
1-Revival of ties increases investor confidence
The easing of diplomatic tensions boosts investor confidence. The cooling of tensions is a sign of political stability that reduces perceived risk for Canadian pension funds, banks and corporations considering long-term investments in India.
A revival of Indo-Canadian economic and strategic engagement – particularly through institutional investors, pension funds and trade-focused agencies – could have a significant ripple effect on India’s capital markets and investment ecosystem.
A revival of Indo-Canadian economic and strategic engagement – particularly through institutional investors, pension funds and trade-focused agencies – could have a significant ripple effect on India’s capital markets and investment ecosystem.
India has said it aims to increase bilateral trade to $50 billion by 2030. Experts said the US$50 billion export was not only an economic milestone but signaled a “recalibration of trade priorities designed to build resilience and expand high-value sectors”.
“Real progress will depend on restoring strategic trust, and the foundations being laid today reflect an effort to undo much of the diplomatic tension experienced by the previous Canadian government,” Professor Sanjal Shastri, Faculty of International Studies at FLAME University, told LiveMint.
2- India as a growing market
Funds like CPPIB, CDPQ and OTPP have significant investments in Indian infrastructure, real estate and renewable energy. A reset between India and Canada could accelerate pending proposals and new commitments.
Trade experts said the renewed diplomatic engagement had already raised expectations across the industry. “India and Canada resuming FTA (Free Trade Agreement) talks is a highly positive signal for exporters,” Ajay Sahai, CEO of the Federation of Indian Export Organizations (FIEO), told Mint recently.
“Faster market access and lower tariffs can open up real opportunities for Indian industries such as textiles, engineering goods, pharmaceuticals and agricultural products,” he said.
Reports say that the Canadian side, however, has set a target of $70 billion by 2030. The difference between the Indian and Canadian targets reflects a bullish assessment of the potential of the Indian market by Canadian businesses. In 2024, India-Canada bilateral trade in goods and services will be around $22.6 billion, according to official figures shared on the website Consulate General of India in Toronto
Remember that Canada and India started negotiations for such a trade agreement about fifteen years ago, but it was reduced to a sectoral agreement that would only cover certain industries.
Heavily dependent on trade, Canada exports over 75 percent of its goods to the US. While most US exports are protected by the United States, Mexico and Canada Trade Agreement (USMCA), this agreement is due for review in 2026.
India and Canada are finalizing a deal to supply uranium to New Delhi, another sign of warming relations after two years of strained diplomatic relations, The Globe and Mail reports.
Read also | India and Canada want to restore trade ties after diplomatic rift
The deal is likely to be worth about $2.8 billion over a period of 10 years, according to people familiar with the development. Terms of the deal may be modified prior to announcement, they added.
3- Long-term stability
Trade talks between the two nations were suspended in late 2023 after then-Canadian Prime Minister Justin Trudeau accused Indian government agents of possible involvement in the killing of Canadian Khalistani separatist Hardeep Singh Nijjar – a claim India dismissed as “absurd”.
The two countries have since restored relations following a change of leadership in Ottawa in March.
In June, Modi met Carney at the G7 summit. The foreign ministers of the two countries met three times this year. And Canada’s trade minister also visited India this month
“However, the long-term stability of India-Canada relations will depend on Canada’s willingness to take tangible steps against anti-Indian extremist elements that undermine bilateral trust,” Professor Shastri said.
4- Stronger capital flows into India
Canada is positioning itself as a major player in climate finance. The renewed engagement could mean more funding earmarked for renewables, battery storage and green hydrogen, they said. It would also mean direct Canadian support for India’s energy transition goals and participation in blended finance projects with Indian banks.
Heavily dependent on trade, Canada exports over 75 percent of its goods to the US. While most US exports are protected by the United States, Mexico and Canada Trade Agreement (USMCA), this agreement is due for review in 2026.
“If this reset continues meaningfully, renewed Canadian interest could unlock stronger capital flows to India through investments in technology, clean energy and services to complement India’s manufacturing and digital innovation strengths,” Professor Shastri said.
5- Trade volume between India and Canada
Over the years, India and Canada have developed a growing trade relationship with bilateral trade involving goods such as energy, precious stones, machinery and agricultural products. Canada exports significant quantities of oil, lumber, pulses and machinery to India. India’s exports to Canada include pharmaceuticals, textiles, auto parts and IT services
Real progress will depend on restoring strategic confidence.
One critical area to watch, according to Professor Shastri, is higher education. Student mobility and institutional cooperation represent one of the greatest bridges between our two countries, he said.
“We can see positive developments enabling smoother academic pathways and research partnerships. Ultimately, deeper economic and educational cooperation could create a win-win model that supports economic expansion while strengthening people-centric diplomacy,” Professor Shastri told LiveMint.
Key things
- Improved diplomatic relations increase investor confidence and open new investment avenues.
- The target of US$50 billion in bilateral trade by 2030 signals a recalibration of trade priorities.
- Renewed engagement could lead to stronger capital flows to India, particularly in renewable energy and technology.
