India-Canada trade and economic relationship set to soar

The India-Canada trade and economic relationship has seen significant momentum, after both countries decided to relaunch the Comprehensive Economic Partnership Agreement (CEPA) negotiations last year. 

The visit of Piyush Goyal, Minister of Commerce and Industry, to Canada in May 2023, for the sixth India-Canada Ministerial Dialogue on Trade and Investment (MDTI) is well-timed and will further add to this momentum.  The MDTI focuses on strengthening bilateral trade and investment ties and enhancing cooperation across multiple sectors, from food to green energy, critical minerals, and defence. 

During his visit, Minister Piyush Goyal is holding several meetings with CEOs of Canadian and Indian companies to promote B2B engagement. Goyal and his counterpart, the Canadian Minister of International Trade, Export Promotion, Small Business, and Economic Development, Mary Ng, will review the progress of the India-Canada CEPA negotiations, with a possibility for an interim agreement or EPTA (Early Progress Trade Agreement). Since the negotiations were launched in 2022, seven rounds of negotiations have been completed as of date. 

 

India and Canada have a history of a longstanding bilateral relationship based on shared commonalities between the two nations, such as the commitment to democracy, pluralism, and the rule of law, along with strong people-to-people ties. In recent years, the bilateral economic ties have grown significantly as well. Bilateral trade in goods and services was around $10 billion in 2019-20. India is Canada’s 11th largest export market and 12th largest trading partner. India’s total merchandise trade with Canada was $6.62 billion in 2021-22. In the same year, India registered a merchandise trade surplus of $0.51 billion. Bilateral trade of services between Canada and India increased almost 3.5 times between 2011 and 2020 (from $1.57 billion in 2011 to $5.50 billion in 2020). Canada’s imports from India reached to $1.78 billion in 2020, from $0.86 billion in 2010. 

One of the largest immigrant groups in Canada are people of Indian origin. The 22 Indian-origin Members of Parliament (in the total strength of 338) in the House of Commons of Canada, is an example of the soft power of the Indian diaspora in the country. Since 2018, India has also been the largest source country for international students in Canada. In the past few years, Canada’s imports of services such as transport services, travel services, telecommunication services, professional services (legal, accounting, architectural, engineering) from India have increased manifold. In 2020, India ranked among the top ten import destinations of Canada in computer services (rank was 2nd), telecommunication (3rd), audio-visual services (4th) and travel services (7th). These may be some of the sectors, apart from professional/business services, where B2B collaborations can be explored during the visit of Indian Minister. Canada faces manpower shortages in sectors like IT and ITeS, healthcare, engineering, and education services, and the Indian workforce can help to mitigate the shortages. The removal of barriers to the mobility of skilled workers and professionals can be an area for discussion. 

The cumulative FDI equity inflows from Canada, between April 2000 – December 2022, was $3,184.52 million. Canada ranks 19th among the source countries for investment into India, with a percentage share of only 0.51%. The top five sectors that attracted FDI equity inflows from Canada includes services sector (44.28%), drugs and pharmaceuticals (8.71%), trading (7.14%), computer software and hardware (6.94%) and food processing (2.64%). There is scope for India to attract FDI from Canada in manufacturing, finance and insurance services, transportation and warehousing, information and cultural industries and in the technology sector. Canadian Pension Funds and other major firms have pledged portfolio investments of over Canadian Dollar 55 billion in India in sectors such as infrastructure, highways, airports, clean energy, education, logistics, real estate, banking, hospitality and warehousing. Canadian companies are increasingly viewing India as an attractive destination for investments, and the visit provides an opportunity to showcase India, highlight initiatives like the Production-Linked-Incentive (PLI) scheme, and build B2B connect. Attracting more investment from Canada will unleash further trade and collaborations.

Given that there is potential for India to enhance exports of agri-food products, Goyal is inaugurating the Indian Pavilion at SIAL CANADA-2023, the largest food innovation trade show in North America. SIAL CANADA-2023 has a participation of more than 1000 national and international exhibitors from 50 countries, providing opportunities for Indian exporters to connect to Canadian importers.   

The visit also provides opportunities for regulatory cooperation to ease some of the barriers related to the recognition of standards and processes, across a wide range of food and non-food products, including organic goods. Easing such non-tariff issues through regulatory cooperation can help to increase our exports. Canada allows multiple entry visa for professionals but does not currently offer an e-visa option for Indian nationals, which can be discussed. As Canada encourages and supports mutual recognition agreements (MRAs) in professional services, regulators in both countries can work together to facilitate mutual recognition of education and qualification standards. Lastly, the role of Canada as a key member of the USMCA Free Trade Area (erstwhile NAFTA Free Trade Area), cannot be underestimated. Many Indian companies and service providers have been catering to the USA market from Canada. There are thus opportunities for Indian and Canadian firms to jointly cater to third-party markets, and the visit sets the platform for such collaborations and partnerships.     

The author is Professor, ICRIER