The world's fastest-growing major economy — and Canada's most diplomatically strained bilateral relationship
India is the world's fifth-largest economy and fastest-growing major economy (6.8% GDP growth in 2024, IMF), with a population of 1.4 billion representing the single largest consumer market opportunity globally. Total Canada-India bilateral goods trade reached approximately $13.5B CAD in 2024 (StatCan), ranking India approximately eleventh among Canada's trading partners — a figure that significantly understates the economic relationship when diaspora remittances, services trade, and educational flows are included. The bilateral commercial relationship is real and growing, concentrated in Canadian agri-food exports (pulses, potash), Indian pharmaceutical and textile exports to Canada. However, the government-to-government relationship is under serious strain following the June 2023 assassination of Hardeep Singh Nijjar in Surrey, BC, and the Canadian government's allegation of Indian government involvement. India expelled Canadian diplomats; Canada reduced its diplomatic presence in India. The CEPA (Comprehensive Economic Partnership Agreement) negotiations launched in 2022 were paused in 2023 and have not formally resumed as of Q1 2026. The CEPA question is the most consequential near-term trade policy variable in the bilateral relationship — resumption would be transformative given the complementarity of the two economies.
Narendra Modi's BJP-led National Democratic Alliance won the May/June 2024 general election for a third consecutive term, but with a reduced BJP seat count that increased the coalition's dependence on smaller NDA parties. This makes trade liberalization — already not a BJP priority — even less likely to drive near-term policy change. Modi's economic policy has emphasized domestic manufacturing (Make in India), import substitution, and strategic autonomy — a posture that complicates FTA negotiation with any partner and particularly with Canada given the diplomatic context.
The Hardeep Singh Nijjar case has created the most serious rupture in Canada-India diplomatic relations since independence. India expelled six Canadian diplomats in October 2023, and Canada reduced its diplomatic presence in India to a skeleton mission. The commercial relationship continues — trade in agri-food and pharmaceuticals has not stopped — but government-to-government facilitation (TCS market entry support, EDC financing, bilateral government contacts) is severely limited. The resumption of CEPA negotiations is the clearest signal that would indicate a normalization of the bilateral relationship, but no resumption has been announced as of Q1 2026.
India's 6.8% GDP growth in 2024 makes it the fastest-growing G20 economy by a wide margin — driven by domestic consumption, infrastructure investment, and services exports. India's middle class is expanding rapidly, adding over 25 million middle-income households per year. The IMF projects India will become the world's third-largest economy by GDP (nominal) by approximately 2027, overtaking Japan and Germany. This trajectory makes India a structurally important long-term market for Canadian businesses regardless of the current diplomatic difficulties.
India's structural economic risks include high youth unemployment, infrastructure gaps that constrain manufacturing competitiveness, fiscal pressures from subsidy programs, and currency vulnerability. The INR has depreciated against the CAD — making Indian goods cheaper in Canadian markets but Canadian exports more expensive in India — a dynamic that affects agri-food competitiveness in the Indian domestic market.
Top 5 Canadian exports to India: Pulses (lentils, chickpeas) at approximately $1.5B+ — Canada supplies approximately 65% of India's lentil imports, making this the single most Canada-concentrated commodity in the bilateral relationship; coal and mineral fuels approximately $1.2B; potash approximately $0.9B — India is one of the world's largest fertilizer users; scrap metals approximately $0.4B; aerospace approximately $0.3B. Canada's export profile to India is dominated by agricultural inputs and resources — not finished goods or services.
Top 5 Canadian imports from India: Pharmaceuticals at approximately $2.1B — India is the world's largest generic drug exporter and Canadian hospitals and pharmacies depend substantially on Indian-manufactured generics; apparel and textiles approximately $1.4B; machinery approximately $0.9B; chemicals approximately $0.7B; iron and steel products approximately $0.5B. India runs a trade surplus with Canada primarily through manufactured goods and pharmaceuticals against Canadian commodity exports.
India's non-tariff barriers are extensive and well-documented: complex FDI restrictions with sector-specific foreign ownership caps (in media, insurance, defence manufacturing), mandatory local content requirements, opaque regulatory approval processes often requiring extensive local legal support, sanitary and phytosanitary requirements on agri-food that are frequently applied inconsistently, and intellectual property protection that falls below the standards required for Canadian technology and pharmaceutical companies to confidently enter the Indian market. These barriers exist independent of the diplomatic dispute and will not be resolved without a concluded trade agreement.
Bombardier maintains an active commercial relationship with Air India — one of the world's fastest-growing airlines following its privatization and acquisition by the Tata Group — as a business jet manufacturer, though the defence aerospace dimension of the bilateral relationship is constrained by the diplomatic context. SNC-Lavalin (now AtkinsRealis) operates an engineering and project management business in India through its Atkins division, working on infrastructure and industrial projects in a market with enormous infrastructure investment demand. The major Canadian banks — RBC, TD, Scotiabank, BMO, CIBC — maintain representative offices and correspondent banking relationships in Mumbai, Delhi, and other financial centres, but operate under Indian foreign bank restrictions that limit retail and full commercial banking operations; none has achieved the scale of operations in India that they have in the US or UK. Shopify serves a large and rapidly growing base of Indian merchants through its global platform — a services relationship that operates entirely through digital channels without requiring physical Indian presence. Multiple Canadian pension funds (CPPIB, Ontario Teachers, OMERS) have made private equity and infrastructure investments in India through their Asian investment programs, despite the bilateral tensions at the government level. The Indian diaspora in Canada — estimated at over 1.4 million people — creates substantial remittance, travel, and consumer goods flows that are economically significant but not captured in goods trade statistics.
| Risk Category | Level | Assessment |
|---|---|---|
| Political | Elevated | The Nijjar case has genuinely strained the bilateral relationship at the government level; CEPA is paused; Canadian government travel advisory for India remains in effect; diplomatic staffing in both countries remains reduced from 2022 levels. |
| Regulatory | Elevated | Complex FDI restrictions, sector-specific foreign ownership caps, opaque regulatory approvals, mandatory local content requirements, and weak IP enforcement are persistent barriers that apply to all foreign companies in India regardless of nationality. |
| Commercial | Moderate | Strong demand growth across the Indian economy creates commercial opportunity; however, Canadian companies without FTA market access compete against US, UK, and EU companies that have better diplomatic relationships with India and in some cases preferential regulatory treatment. |
| Currency | Moderate | INR has depreciated against CAD, raising the rupee cost of Canadian imports; the Reserve Bank of India manages the INR within a managed float that limits volatility but cannot prevent sustained depreciation trends. |
| Supply Chain | Moderate | India's logistics infrastructure — ports, road networks, cold chain — has improved significantly under Modi-era investment but remains below OECD standards; commodity exports (pulses, potash) use established bulk shipping routes that function reliably. |
| Geopolitical | Elevated | The Canadian government has issued travel advisories for India related to the Nijjar case; Canadian diplomats and citizens of Indian origin with Canadian citizenship face elevated personal risk in certain contexts; this is an unusual and serious risk profile not seen in Canada's other major bilateral relationships. |
India presents a significant corruption and compliance risk for Canadian companies. Bribery risk is elevated across regulatory touchpoints — customs clearance, licensing, environmental and construction permits, and government procurement — particularly at subnational government level where enforcement of India's Prevention of Corruption Act (PCA) is uneven. Canadian companies are subject to CFPOA obligations and should conduct enhanced due diligence on agents, distributors, and local JV partners in India. The India-Canada CEPA negotiations make this a high-priority market, but the compliance overhead of operating in India is material and should be factored into market-entry business cases.
PEP screening should be applied to state-owned enterprise counterparties (ONGC, Coal India, SAIL, BHEL, Air India under Tata) and to counterparties with close political connections in infrastructure and defence sectors. India is not FATF-listed. The large diaspora connection reduces some operational risks but does not eliminate compliance exposure. CTI rates India High Compliance Risk requiring a documented CFPOA program, enhanced agent due diligence, and periodic compliance training for in-market staff.
Canada has the largest Indian diaspora community of any country outside the United States, with approximately 1.8 million people of Indian origin — including recent immigrants, second-generation Canadians, and the broader community of Indian international students — resident in Canada as of the 2021 census.D1 This community is concentrated in the Greater Toronto Area (Brampton, Mississauga, north Toronto), Metro Vancouver (Surrey, Burnaby), and Calgary. It spans every socioeconomic stratum, with significant representation in the medical, legal, technology, and financial services professions as well as in small business ownership, particularly in the agri-food processing, retail, and transportation sectors.
The diaspora connection creates genuine commercial infrastructure that exists independent of the government-to-government relationship. Indian-Canadian business networks facilitate trade introductions, due diligence, and market navigation in ways that formal trade commissioner services cannot replicate. The Indo-Canada Chamber of Commerce (ICCC) operates as the primary bilateral business organization, with chapters in Toronto, Vancouver, and Calgary. It connects Canadian companies seeking Indian market entry with diaspora members who have direct commercial relationships in India.
Remittance flows from Canada to India are significant. Canada is among the top five source countries for remittances to India, with estimated annual flows of approximately $3.5–4 billion CAD. These flows — largely informal in structure and concentrated in specific corridors (Punjab, Gujarat, Kerala) — are an underreported dimension of the Canada-India economic relationship that persists regardless of diplomatic temperature.
Indian international students represent a separate and quantitatively large dimension of people flows. Canada became the top destination globally for Indian students in 2022 and 2023, with over 300,000 Indian nationals on study permits in Canada at peak. Federal government changes to study permit caps and post-graduation work permit eligibility in 2024 reduced these flows, but Canada remains a top destination. The commercial significance: Indian students in Canada are a direct revenue source for Canadian post-secondary institutions, and many remain in Canada under immigration pathways, contributing to the diaspora and to the Canadian labour market.
For Canadian businesses considering or expanding into India, three entry points provide the most direct access to market intelligence, financing, and partner introductions. These are not the only resources, but they are the most efficient starting sequence given the complexity of the Indian market and the current diplomatic constraints on government-facilitated introductions.
Without a concluded CEPA or bilateral investment treaty, Canadian companies have no preferential access to Indian government procurement. India is not a signatory to the WTO Government Procurement Agreement (GPA), which means WTO rules do not provide the procurement market access disciplines that apply in CETA or CUSMA markets. Indian public procurement is large — central and state government spending exceeds $400B USD annually — but is effectively closed to foreign bidders in most sectors through domestic preference requirements and opaque tendering processes.
1. Statistics Canada, Table 12-10-0011-01: International merchandise trade by country, 2024 annual data.
2. International Monetary Fund, World Economic Outlook, October 2024: India GDP, growth, inflation data.
3. Centre for Monitoring Indian Economy (CMIE): India unemployment data, 2025.
4. Reserve Bank of India (RBI): Monetary policy, inflation, currency data, 2024–2025.
5. Global Affairs Canada, Chief Economist Branch: Canada-India bilateral trade analysis, 2024.
6. Canada's Indo-Pacific Strategy, Global Affairs Canada, November 2022: India bilateral priorities, $750M envelope.
7. Government of Canada, CEPA negotiation updates: pause announcement, September 2023.
8. Moody's Investors Service / S&P Global Ratings: India sovereign credit rating, 2024.
9. Government of Canada, Travel Advisory — India: current advisory text and rationale.
10. Trade Commissioner Service, India Country Market Reports: sector analysis, 2024–2025.
D1. Statistics Canada. (2022). 2021 Census of Population: Immigration and ethnocultural diversity. Reports on population of Indian origin in Canada, geographic distribution, and socioeconomic characteristics. statcan.gc.ca