India-Canada rift bad for business; IT firms may struggle to land new deals

Canada makes up to 5-6 per cent of Indian IT companies' revenues. Top companies like TCS and Infosys have recently acquired work from Canadian government departments and organisations

Experts from the IT industry have warned that deteriorating India-Canada relations could adversely affect the ability of Indian IT services companies to secure new deals, according to a report in Financial Express (FE). Following the Indian government's recent decision to suspend visa services for Canadian citizens, experts cautioned that if the situation remains uncontrolled, public sector clients could veer away from Indian companies.

Peter Bendor-Samuel, CEO of Everest Group, was cited in the FE report as stating, "At this moment, it's a mild frustration. However, if the situation persists, it will initially impede Indian-based firms from winning new business and could eventually lead firms with ongoing business in India to consider relocating it to another country."

Joel Martin of HFS elaborated that since India has cancelled visa applications for Canadians, the flow of talent between the two countries is likely to be affected. Martin added that this could be detrimental to Indian IT services companies that engage with public and private organisations.

Revenue from Canada for Indian IT Firms

Martin further explained that while existing offshore arrangements can manage this situation, some Canadian public sector firms may explore alternatives to ensure they have nearshore access to talent. Canada constitutes 5-6 per cent of revenues for IT companies. Leading firms like Tata Consultancy Services (TCS) and Infosys have recently secured projects from Canadian government departments and organisations, the FE report disclosed.

Infosys Public Services (IPS), the North American subsidiary of Infosys, launched a new step-down subsidiary called Infosys Public Services Canada (IPS Canada) to expedite the process of digital transformation across Canadian public sector organisations.

Likewise, TCS entered into a strategic partnership with Payments Canada, the country's largest payment organisation, to modernise its payment system operations.

Background on India-Canada Relations

The tension between India and Canada escalated when Canadian Prime Minister Justin Trudeau accused the Indian government of assassinating Sikh separatist Hardeep Singh Nijjar on Canadian soil. In response, the Indian government dismissed the allegations as "absurd and motivated."

Up to this point, both India and Canada have expelled senior diplomats in a tit-for-tat move. On Thursday, September 21, India temporarily suspended visa services for Canadian citizens.