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Resetting Indo-Canada Relations: From Rift to Realignment

  • Ekta
  • 4 hours ago
  • 7 min read

The visit of Canadian Prime Minister Mark Carney to India from February 27 to March 2 marks more than a routine diplomatic engagement. It represents a calculated effort to rebuild a relationship that had deteriorated sharply under former Prime Minister Justin Trudeau. After nearly two-and-a-half years of strained ties, expulsions of diplomats, suspended trade talks, and frozen political dialogue, Ottawa and New Delhi are attempting a structured reset grounded in economic pragmatism and strategic complementarity.


​"This is not merely the renewal of a relationship; it is the expansion of a valued partnership with new ambition, focus, and foresight between two confident countries charting our own course for the future." Prime Minister Mark Carney, reflecting on how ties have significantly improved. 


His four-day visit signals not merely reconciliation, but reorientation toward trade expansion, energy security, technology collaboration, and institutionalized dialogue in a shifting global order characterized by volatility.


From Crisis to Cautious Engagement


Relations plunged into crisis in 2023 after Canada alleged Indian involvement in the killing of Sikh activist Hardeep Singh Nijjar, claims India firmly denied. The episode triggered diplomatic expulsions and deep mistrust. By 2024, bilateral ties had reached their lowest point in decades.


Yet the recent leadership-level engagement signals a deliberate effort to restore cordiality and institutional trust. In their Joint Leaders’ Statement, both governments affirmed that “a strong, resilient, and forward-looking partnership between two vibrant democracies contributes meaningfully to mutual prosperity and to advancing shared global priorities.” Prime Minister Mark Carney further “reaffirmed Canada’s strong commitment to advancing this comprehensive partnership” during his bilateral discussions in New Delhi. Echoing this shift in tone, External Affairs Minister S. Jaishankar noted that he appreciated Carney’s “commitment towards charting a forward-looking partnership.”


Since assuming office in 2025, Carney has adopted a measured approach. Diplomatic envoys have been restored, communication channels reopened, and rhetoric softened. His strategy appears to separate political disagreements from economic cooperation, recognising that in today’s interconnected world, total disengagement carries its own costs.


Trade and CEPA: Economics as the Anchor


The most significant outcome of the visit is the launch of negotiations for a Comprehensive Economic Partnership Agreement (CEPA). The revival of CEPA talks demonstrates that both governments are determined to insulate trade from political turbulence.


The USD 50 Billion Vision and CEPA Acceleration


Canada’s strategic outreach toward India is anchored in an ambitious economic objective: to more than double bilateral trade to approximately $51 billion by 2030. Currently, bilateral trade remains modest: in 2023, total trade between India and Canada was around $9.36 billion, with Indian exports at $5.56 billion and Canadian exports at $3.80 billion, underscoring the gap that CEPA aims to bridge. To achieve this, Ottawa is prioritising accelerating negotiations on the Comprehensive Economic Partnership Agreement (CEPA), which would reduce tariffs, address non-tariff barriers, and expand market access across goods and services. A central component of this effort is the expansion of services trade, particularly in education, fintech, clean technology, and digital innovation. Canada sees India not only as a large consumer market but as one of the world’s fastest-growing major economies, driven by rapid GDP growth, rising middle-class demand, a manufacturing push under the “Make in India” initiative, and a sweeping digital transformation powered by fintech, artificial intelligence, and e-governance. At a time when growth in many Western economies is moderating, India offers Canada scale, dynamism, and long-term opportunity.


Capitalising on India’s Growth Trajectory


Another pillar of Canada’s strategy lies in critical minerals and clean energy cooperation. As a resource-rich nation with significant reserves of lithium, cobalt, nickel, and rare-earth elements, Canada is well-positioned to support India’s ambitions for electric vehicle and battery manufacturing. Both countries are also exploring partnerships in green hydrogen, renewable technologies, and sustainable supply chains, including collaboration through the International Solar Alliance. In addition, India’s multi-trillion-dollar infrastructure pipeline presents significant investment opportunities for Canadian pension funds and institutional investors, particularly in sustainable urban development, smart cities, transportation networks, and energy infrastructure. Canadian investors increasingly view India as a stable, high-return destination aligned with long-term global growth trends.


India’s Strategic Priorities in the Reset

From India’s perspective, engagement with Canada serves multiple strategic objectives. First, it supports market diversification and export expansion. India aims to deepen exports of pharmaceuticals, IT services, engineering goods, textiles, and agricultural products. Strengthening services trade, especially in digital technology and consulting, remains a key goal. Second, Canada plays a vital role in India’s energy security and resource strategy.

Canadian uranium supports India’s civil nuclear energy program, while access to critical minerals is essential for scaling renewable energy and electric mobility manufacturing. Cooperation in LNG and clean hydrogen further aligns with India’s climate commitments and long-term net-zero targets.


Strengthening Strategic Investment and Innovation Ecosystems


India is also seeking more substantial investment and technology partnerships with Canada. Greater Canadian foreign direct investment in infrastructure, artificial intelligence, biotechnology, and advanced manufacturing would accelerate India’s modernisation goals. Academic and research collaboration between universities, innovation hubs, and startups in both countries can strengthen joint capabilities in healthcare, agri-tech, and clean energy. At the strategic level, India supports Canada’s deeper engagement in the Indo-Pacific region and sees value in coordination on resilient supply chains, maritime security, and broader regional stability. The partnership reflects complementary strengths. For Canada, India represents scale, speed, and diversification in an evolving global economy. For India, Canada offers capital, advanced technology, and secure access to key natural resources. If political stability is sustained and CEPA negotiations reach completion, India-Canada relations have the potential to evolve from a largely transactional trade engagement into a comprehensive strategic economic alliance by 2030, anchored in trade, investment, clean energy, and technological cooperation.


Technology, Innovation, and Education


The most forward-looking dimension of the visit lies in innovation diplomacy. Twenty-four MoUs between universities and institutions in areas such as artificial intelligence, healthcare, agriculture, and advanced research signal a shift toward knowledge-based cooperation. The launch of a Canada–India Joint Talent and Innovation Strategy by Universities Canada underscores the importance of AI governance frameworks. By investing in intellectual and technological collaboration, both nations are laying the groundwork for next-generation economic ties.


In addition, cultural diplomacy and indigenous outreach are becoming essential connectors in the bilateral relationship. The Bharat Tribes Festival, organised by the Tribal Cooperative Marketing Development Federation of India (TRIFED) under the Ministry of Tribal Affairs, showcases India’s rich tribal heritage, traditional crafts, organic products, indigenous art forms, and community-based entrepreneurship. Such initiatives open avenues for collaboration with Canada in areas such as indigenous entrepreneurship, sustainable handicraft trade, cultural preservation, and knowledge exchange with First Nations communities, thereby adding a grassroots, people-centric dimension to economic cooperation.


India is also seeking more substantial investment and technology partnerships with Canada. Greater Canadian foreign direct investment in infrastructure, artificial intelligence, biotechnology, and advanced manufacturing would accelerate India’s modernisation goals. Academic and research collaboration between universities, innovation hubs, and startups in both countries can strengthen joint capabilities in healthcare, agri-tech, and clean energy. At the strategic level, India supports Canada’s deeper engagement in the Indo-Pacific region and sees value in coordination on resilient supply chains, maritime security, and broader regional stability.


Defence and Indo-Pacific Engagement


The establishment of an India–Canada Defence Dialogue and India’s support for Canada’s entry into the Indian Ocean Rim Association (IORA) as a Dialogue Partner signal that the reset in bilateral ties extends well beyond trade and investment. Defence engagement between the two countries reflects a growing recognition that economic resilience and security stability are increasingly intertwined in the Indo-Pacific.


For India, the Indo-Pacific is not merely a geographic construct but a strategic priority anchored in maritime security, freedom of navigation, and supply chain stability. For Canada, whose Indo-Pacific Strategy seeks deeper engagement in Asia, a partnership with India provides both legitimacy and regional access. The proposed defence dialogue could facilitate cooperation in maritime domain awareness, naval exchanges, counterterrorism coordination, cyber defence, and peacekeeping collaboration.


In an era marked by strategic recalibration across the Indo-Pacific, both countries see value in middle-power coordination. Neither India nor Canada is a treaty ally of the other. Yet, both are democratic actors navigating a security environment shaped by intensifying US–China competition, grey-zone challenges, and expanding naval footprints. Structured defence engagement therefore serves as a stabilising mechanism—building trust, reducing misperceptions, and strengthening multilateral cooperation platforms.


Symbolism and Political Messaging


Diplomacy is often conveyed as much through symbolism as through policy documents. Prime Minister Mark Carney’s tribute at the Taj Mahal Palace Hotel memorial for the victims of the 26/11 Mumbai terror attacks carried powerful political messaging. It underscored shared democratic values and reaffirmed Canada’s commitment to counterterrorism cooperation. Such gestures resonate deeply in India, where the memory of the 2008 attacks remains central to national security discourse.


Meetings at Hyderabad House with Prime Minister Narendra Modi, along with participation in the CEOs Forum, reinforced the primacy of economic diplomacy in the reset process. The optics of high-level engagement suggested a deliberate effort to move the relationship away from confrontation and toward structured dialogue.


Domestically, however, Carney must navigate the sensitivities of Canada’s significant Sikh diaspora politics while pursuing pragmatic international engagement. Balancing domestic political constituencies with foreign policy imperatives remains a complex challenge. For India, engagement with the new Canadian leadership presents an opportunity to recalibrate ties after a period it viewed as politically influenced by tensions under former Prime Minister Justin Trudeau. The reset, therefore, carries both external and internal political dimensions.


The Road Ahead


The 2023 diplomatic rupture underscored how quickly political tensions can disrupt even structurally strong economic relationships. The recent reset marks progress, but its durability will depend on institutionalisation rather than symbolism.


To ensure long-term stability, both governments should prioritise the timely conclusion of CEPA with robust provisions on digital trade, investment protection, clean energy cooperation, and skilled mobility. Institutionalising the Defence Dialogue, potentially through a 2+2 ministerial framework, safeguards security cooperation from political volatility. A comprehensive critical minerals partnership covering extraction, processing, and supply chain integration should be fast-tracked to anchor economic interdependence in strategic sectors.


Equally important is political risk management. Both sides must maintain calibrated public messaging, prevent diaspora politics from destabilising bilateral dialogue, and insulate trade and energy cooperation from episodic domestic pressures. Strengthening bureaucratic-level engagement and creating predictable consultation mechanisms will reduce the likelihood of future diplomatic escalations.


If implemented with consistency and political will, this reset could evolve into a stable middle-power partnership anchored in trade, energy security, technological collaboration, and Indo-Pacific coordination. In an era of supply chain fragmentation and geopolitical uncertainty, pragmatic institutional cooperation - rather than episodic diplomatic warmth - will determine whether this realignment endures.


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