Large long-term investments in India by Canadian entities such as pension funds aren’t expected to be affected by the current diplomatic row as such investors don’t take business decisions based on short-term political issues, two officials familiar with the matter said on Tuesday.
India is the fastest growing major economy and serious investors, including pension funds, can’t ignore this, the officials representing two economic arms of the central government said on condition of anonymity. Pension funds, including Canadian Pension Plan Investment Board (CPPIB) and other institutional investors, have cumulatively invested more than Canadian $75 billion in India.
More than 600 Canadian firms have a presence in India, the officials said. “CPPIB is one of the major Canadian investors in India, and these firms act at an arm’s length from governments. They cannot respond to any knee-jerk reaction of the government,” one official said.
He added, “CPPIB is quite an active investor. In August, it announced its investment of $250 million in a loan facility to support the merger of two Indian pharmaceutical firms.” The second official said that India’s direct economic dependence on Canadian government is not significant.
India stopped taking bilateral aid from several countries, including Canada, many years ago. As a result, in October 2003, the Canadian International Development Agency (CIDA) notified the phasing out of its bilateral assistance programme by 2007. India prepaid all Canadian loans taken during 1966-84 by October 2003.
{{/usCountry}}India stopped taking bilateral aid from several countries, including Canada, many years ago. As a result, in October 2003, the Canadian International Development Agency (CIDA) notified the phasing out of its bilateral assistance programme by 2007. India prepaid all Canadian loans taken during 1966-84 by October 2003.
{{/usCountry}}Canada’s share in India’s total foreign direct investments (FDI), however, is small, the second official said. “Cumulatively, Canadian equity inflow into India between April 2000 and June 2024 was less than 1%, which is $695.16 billion,” he said.
Similarly, Indian trade is in no way dependent on Canada, he said. “Despite negotiations being at an advanced stage, we suspended FTA [free trade agreement] talks with Canada indefinitely,” he added.
These talks were paused just days before Prime Minister Justin Trudeau sent bilateral ties into a tailspin in September 2023 by alleging there was a link between Indian government agents and the killing last year of pro-Khalistan separatist Hardeep Singh Nijjar.
Already designated a terrorist by India, Nijjar was shot dead outside a gurdwara in Surrey in June 2023.
Another person who has been closely linked to India-Canada ties advised caution about the long-term position of Canadian pension funds investing in the country. “These investors closely track the political climate and diplomatic relations. They will have seen the ties bottoming out over the past two years and may look for better options if things get worse,” the person said.
The person pointed to Canadian foreign minister Mélanie Joly’s remarks on Monday that “everything is on the table”, when it came to the issue of possible sanctions against India.
Former ambassador Ajay Bisaria, who served as India’s envoy to Canada during 2020-2022, however, said he believed trade and investment ties wouldn’t be hit by the diplomatic row. “India has a Trudeau problem, not a Canada problem. Both governments have made it clear that they are committed to encouraging trade, business, visas and people-to-people contacts.”
India was negotiating an interim early progress trade agreement, which would have culminated in a comprehensive economic partnership agreement (CEPA) or wide-ranging FTA. After the relaunch of FTA negotiations between India and Canada in March 2022, nine rounds of negotiations were held till last year. Trade between the two countries was worth $8.16 billion in 2022-23.