Understanding Fault Lines: Deep dive into India-Canada diplomatic standoff

Question 1: What are the key reasons behind the recent diplomatic tensions between India and Canada?

India and Canada have shared a strong and meaningful relationship for many years. A large Sikh community also lives in Canada, making it an important connection between the two countries.

Despite their close ties, the relationship between India and Canada has faced challenges due to issues like Khalistani separatism and Canada’s stance on human rights in India.

These problems have caused rising tensions and affected how the two countries interact diplomatically.

Canada's Accusation of India's Alleged Role in Hardeep Singh Nijjar's Killing

Relations between India and Canada grew tense last year after Canadian Prime Minister Justin Trudeau accused India of being involved in the killing of Hardeep Singh Nijjar in Canada. Nijjar was a Khalistani separatist (someone pushing for an independent state separate from India) and had been actively advocating for the cause abroad.

In July 2020, the Indian government officially designated Nijjar as a terrorist under the Unlawful Activities Prevention Act (UAPA). The Ministry of Home Affairs took this step due to his involvement in violent activities and his connections with the separatist group Sikhs for Justice (SFJ).

India dismissed the allegation as “absurd” and “politically motivated.” Since then, relations between the two countries have taken a hit, with tensions affecting diplomatic ties.

On September 21, India stopped issuing visas in Canada, including e-visas.A day earlier, India issued a travel advisory for its citizens visiting Canada. It also warned the Indian community in Canada to stay cautious, saying they might be at risk of being targeted.

The diplomatic tension between India and Canada worsened on October 14, when India ordered six Canadian diplomats to leave the country. India also decided to recall its High Commissioner to Canada and other selected diplomats, citing security concerns. This came after Canada identified these diplomats as "persons of interest" in its investigation into the killing of Khalistani separatist Hardeep Singh Nijjar.

Canada’s Stance on Khalistani Separatism

One reason for the strain in India-Canada relations is Canada’s stance on Khalistani separatism.India has repeatedly said that the main problem is Canada letting pro-Khalistani groups operate freely within its borders. There have also been cases where pro-Khalistani groups have threatened to harm Indian diplomats.

Political Power Play: How Sikh Influence Shapes Canada's Stance on Khalistan

India's main concern, as highlighted by the Indian Express, is that Canada has become a safe haven for Khalistani separatist groups. New Delhi also believes that the Canadian Liberal Party supports these groups to gain their votes.

It is estimated that there are around 20-25 constituencies where these votes play a key role, which is why the Trudeau government has been lenient towards India’s concerns.

Sikhs started moving from India to Canada in the late 19th Century (1801-1900)  and now make up about 2% of the country’s population. But how did this community become so influential in Canadian politics?

During the 1980s (20th Century 1901-2000), Canada saw a fresh wave of immigration from India. This happened as the Indian government intensified its efforts to suppress the pro-Khalistan movement within the country. In response, many supporters of the movement sought refuge in Canada, where they continued to promote their cause, turning it into a global campaign.

The issue of Khalistan may not be a major concern in India or Canada today, but the Canadian government’s hesitation to fully oppose it is tied to the growing influence of Sikhs in Canadian politics. As the Sikh community gains more political power, their role has become an important factor in shaping the government’s stance on such matters.

According to Statistics Canada, the Sikh population in Canada grew from 0.9% in 2001 to 2.1% in 2021. Ontario had the largest Sikh community in 2021, with 300,435 people, followed closely by British Columbia, home to 290,870 Sikhs. About one-third of Canada’s Sikh population lives in the Toronto metropolitan area, while over a quarter are based in Vancouver (British Columbia Province).

Gurbax Singh Malhi, born in Punjab, became the first Sikh to be elected to the Canadian Parliament in 1993 as a member of the Liberal Party. By the 2021 general elections, the number of Sikh MPs in the Canadian Parliament had grown to 18.

On October 14th, 2024, the Indian government stated that Canadian Prime Minister Justin Trudeau’s administration relies on support from a political party led by someone who openly supports separatist views concerning India. The statement also suggested that this political connection has worsened the situation.

The statement likely pointed to the New Democratic Party (NDP), which supported Trudeau’s government until recently. Jagmeet Singh, the NDP leader since 2017, has been accused of backing Khalistan after attending pro-Khalistan events.

External Affairs Minister S. Jaishankar expressed regret over the path Canadian politics has taken. He pointed out that separatist and extremist groups, including those openly supporting violence, have been given room to operate within Canada’s political landscape.

From Kashmir to Nuclear Tests: Key Moments of Strain in India-Canada Ties

India and Canada have faced other challenges in their relationship. One major setback occurred after India’s nuclear tests in 1998. Canada, which strongly supports limiting the spread of nuclear weapons, responded by recalling its high commissioner from India and openly criticizing the tests.

Tensions between India and Canada date back to 1948, when Canada backed the idea of holding a public vote, or plebiscite, in Kashmir.

Question 2: What might be the consequences of a worsening diplomatic conflict between India and Canada?

The growing tensions between India and Canada could not only strain their relationship but also impact India’s image on the global stage. If this dispute continues to escalate, it could lead to several outcomes :

Effect on Trade and Economic Ties

Trade and investment are key parts of the broad partnership between India and Canada.

The growing tension between India and Canada has sparked worries about how it might affect their economic relationship.

This may impact Canadian pension fund investments of $75 billion in India, stall ongoing trade agreement talks, and reduce the flow of money sent to India from people living in Canada.

Canadian Pension Funds Maintain Strong Investments in India Despite Diplomatic Strains

Canadian pension funds have invested heavily in India, with their total investments reaching around $75 billion (approx 6.31 Lakh Crores) . These investments are spread across key sectors, including real estate, financial services, industrial transportation, infrastructure, and renewable energy.

Even though diplomatic relations between India and Canada have recently faced challenges, these funds continue to see India as a promising destination for long-term growth. Between 2013 and 2023, the majority of their investments—about 57%—focused on real estate, financial services, and industrial transportation.

Examples of major investments include the Ontario Municipal Employees Retirement System acquiring a stake in IndInfravit Trust’s toll road projects and the Canada Pension Plan Investment Board investing in India’s National Highways Infra Trust.

The ongoing investments highlight the confidence of Canadian pension funds in India's economic future. They are encouraged by government policies and see significant potential in the country’s expanding markets, indicating that their financial commitments are driven by long-term opportunities rather than short-term political developments.

India exports to Canada : several key items to Canada, with pharmaceutical products ( USD 274.05 million l)eading the list. Other major exports include nuclear reactors, boilers, and their components (USD 195.46 million), along with electrical machinery and iron and steel products (USD 156.03 million)

Indian Imports from Canada : India’s major imports from Canada consist of petroleum products, edible vegetables, fertilizers, pearls, precious metals, and stones, as well as pulp, wastepaper, and electrical machinery and equipment.

India and Canada in Numbers 

Canada's FDI Contribution to India Stands at Only 0.56% : Canada’s share of Foreign Direct Investment (FDI) in India is quite small. According to data from the Department for Promotion of Industry and Internal Trade (DPIIT), India received a total FDI equity inflow of $645.39 billion between April 2000 and June 2023. Out of this amount, only $3.64 billion came from Canada, making up just 0.56% of the total investment.

Canada Hosts 5.26% of the Global Indian Diaspora : According to data from the Ministry of External Affairs (MEA), Canada is home to 5.26% of the 32,100,340 (~3.21 Crores)  overseas Indians. This includes 1,689,055 (~16.9 lakh )individuals, with 178,410 Non-Resident Indians (NRIs) and 1,510,645 Persons of Indian Origin (PIOs).

1 out of every 7 Indian students abroad is in Canada : In 2022, out of approximately 13.25 lakh Indian students abroad, 13.83% (1.83 lakh) were in Canada, according to data from the Ministry of External Affairs.

Canada Ranks as the 4th Largest Source of Tourists to India (2021) : In 2021, Canada made up 5.3% (80,437) of all Foreign Tourists Arrivals (FTA's)  India. A majority (72.6%) of these Canadian visitors were part of the Indian diaspora. Before the pandemic, the number of tourists from Canada had grown significantly, reaching 3,51,859 in 2019, up from just 88,600 in 2001. However, tourist arrivals from Canada dropped sharply after the pandemic.

Bilateral Trade Remains Small, with a Surplus in India’s Favor : In the financial year 2022-23, trade between India and Canada amounted to $8.16 billion, making up just 0.7% of India’s total trade of $1.17 trillion. Canada ranked as India’s 35th largest trading partner. The trade balance favored India, with exports to Canada totaling $4.11 billion, while imports from Canada stood at $4.05 billion.

Diplomatic tensions have already affected talks between India and Canada over a new Free Trade Agreement (FTA). An FTA is a deal that makes trade between countries easier by reducing tariffs and other trade barriers. If finalized, it could have opened up better export opportunities for Indian products like garments, leather, and machinery in Canada. It also promised to boost cooperation in the fast-growing services sectors of both countries.However, the rising tensions between India and Canada might result in the trade deal being called off altogether.

Despite the current diplomatic tensions, some believe there is no major reason to worry about trade relations between India and Canada.A report by the Global Trade Research Initiative (GTRI) highlights that, despite the political tensions, trade between India and Canada has remained largely unaffected.This is mainly because trade is driven by the private sector, and neither India nor Canada has imposed any rules to block the exchange of goods or services.

For now, the steady trade between India and Canada teaches an important lesson — diplomatic tensions can be harmful, but they don't always break economic ties.However, if the dispute continues, both countries will need to handle the situation carefully to prevent serious economic consequences, according to GTRI, as reported by the Indian Express.

Impact on Global Relations

The diplomatic standoff carries global consequences for India. If the allegations are proven, it could harm India’s reputation within the G20. The crisis also affects other countries that have strong relations with both India and Canada.

Canada is a member of the G7 group, alongside the US, UK, Germany, France, Italy, and Japan.

Canada is also part of the Five Eyes alliance, sharing intelligence with the US, UK, Australia, and New Zealand.

All these countries are also key strategic partners for India.

India is part of the Quad alliance with the US, Australia, and Japan, and it also has strong and growing individual relationships with each of these countries.

The diplomatic standoff has put these countries in a difficult position.

Question 3 : What steps can India and Canada take to strengthen their bilateral relationship amid the recent diplomatic tensions?

India has faced diplomatic disputes with several countries in the past. For example, tensions arose with the United States over the  Devyani Khobragade case, , with Italy concerning the trial of Italian marines, and with Norway over a dispute involving child welfare services. Similarly, India had a disagreement with Denmark regarding the extradition of a suspect involved in the Purulia arms drop case. These incidents highlight the challenges India has encountered in managing international relations and balancing legal, political, and diplomatic interests.

The current situation is more serious due to the type of allegation Canada has made. To address this, both countries need to engage in high-level diplomatic talks. This can help them clarify their viewpoints, find common ground, and foster better understanding between them.

Explained: India’s Complex Relations with the U.S., Italy, Norway, and Denmark

i) The Devyani Khobragade case involved an Indian diplomat in the U.S. who was arrested in 2013 for allegedly underpaying her domestic worker and visa fraud. Her arrest led to tensions between India and the U.S., as India protested her treatment, calling it a violation of diplomatic protocols.

ii) The Italian marines' case involved two marines, Massimiliano Latorre and Salvatore Girone, who were accused of killing two Indian fishermen off the Kerala coast in 2012, mistaking them for pirates. This incident led to a diplomatic standoff between India and Italy over legal jurisdiction and trial proceedings.

iii) The Norway child welfare dispute arose in 2011 when Norwegian authorities took custody of two Indian children, citing neglect. The parents argued it was a cultural misunderstanding, as practices like hand-feeding were

iv) The Purulia arms drop case involved the illegal airdrop of weapons in Purulia a district in West Bengal in 1995. India sought the extradition of prime suspect Kim Davy (Niels Holck) from Denmark.The motive behind the operation remains unclear, though it was suspected to be aimed at arming a local religious or insurgent group.  However, Denmark refused, citing concerns over prison conditions in India, leading to a diplomatic standoff. This delayed justice and strained relations between the two countries.

The Role of India in Trudeau's Indo-Pacific Strategy

Without India, Trudeau's Indo-Pacific strategy loses its significance. Fortunately, both India and Canada have shared goals that align well. They are both interested in protecting global rules and stability, keeping a check on China’s growing influence and actions, and working together on important global challenges. These include tackling climate change, improving public health worldwide, preventing the misuse of digital tools, setting rules for artificial intelligence, and easing the financial struggles faced by developing nations.

Addressing these challenges needs a political agreement between India and Canada. This agreement should focus on how both countries engage with Canada’s Indian diaspora. It’s important to manage any negative actions, especially those encouraging separatist movements in India, to maintain healthy relations between the two nations.

Without such an understanding, the gap between Ottawa and Delhi will grow wider, not just in terms of physical distance but also in attitude and mutual trust.

Balancing Act: Protecting India’s Global Ties Amid Canada Controversy

Delhi's strong response to the unproven allegation is reasonable. Now, India needs to focus on making sure that Canada's diplomatic efforts don't harm its improving relations with countries in the Anglosphere and the broader Western world.

Delhi needs to clearly present its side and make sure its broader concerns are understood, especially by English-speaking countries. However, in the end, both India and Canada will benefit from stopping the situation from getting worse and should work together to resolve their differences sincerely.