India and Canada Resume FTA Talks: A Strategic Pivot Toward $50 Billion Trade 

India and Canada have agreed to resume negotiations on a high-ambition Comprehensive Economic Partnership Agreement (CEPA), marking a significant thaw in relations after a diplomatic freeze in 2023 triggered by tensions over the Khalistan movement. Announced by Minister Piyush Goyal, the revival of talks—driven by top-level meetings between the prime ministers—aims to more than double bilateral trade to $50 billion by 2030 by leveraging strategic complementarities in critical minerals, nuclear energy, and technology, though the process must still navigate persistent diplomatic sensitivities and complex market access issues to transform the two “natural allies” into a formidable economic force.

India and Canada Resume FTA Talks: A Strategic Pivot Toward $50 Billion Trade 

In a significant diplomatic development, India and Canada have agreed to restart negotiations on a Comprehensive Economic Partnership Agreement (CEPA), signaling a thaw in relations after a prolonged freeze triggered by serious geopolitical tensions. This move aims to more than double bilateral trade to $50 billion by 2030, creating what both nations describe as a “high-ambition” economic partnership. 

The decision, announced by India’s Commerce and Industry Minister Piyush Goyal, comes after top-level discussions between Prime Minister Narendra Modi and his Canadian counterpart, Mark Carney, and reflects a calculated effort to rebuild bridges and capitalize on substantial economic complementarities. 

A Relationship Rebooted: From Diplomatic Deep Freeze to Trade Thaw 

The resumption of trade talks marks a critical turning point for India-Canada relations, which had stalled dramatically in 2023. The previous collapse was triggered by Canadian allegations of potential Indian government involvement in the killing of Hardeep Singh Nijjar, a Canadian Sikh activist and prominent Khalistan movement figure, in British Columbia in June 2023. 

At the time, then-Prime Minister Justin Trudeau stated there were “credible links” between Indian agents and the assassination, leading to a severe diplomatic crisis. India rejected the allegations as “absurd,” but the damage was done: both countries expelled each other’s diplomats, and India suspended visa services for Canadian citizens. 

The breakthrough began when Prime Minister Carney, who took office in 2025, sought to re-establish ties. His first meeting with Modi occurred at the G7 Summit in Kananaskis, Canada, in June 2025. This was followed by another productive discussion at the G20 Summit in Johannesburg, South Africa, where the two leaders formally agreed to launch CEPA negotiations. 

As Minister Goyal emphasized, the FTA represents more than just economic terms—it’s a “demonstration of trust between the two countries” that provides confidence to investors and businesses alike. 

The Shadow of the Khalistan Movement 

The diplomatic rift that nearly derailed the relationship is intrinsically linked to the Khalistan movement—a campaign for an independent Sikh homeland in India’s Punjab region. Although the movement has minimal political support within India today, it has found resonance among portions of the substantial Sikh diaspora in Canada. 

Canada hosts the largest Sikh population outside India, with approximately 770,000 people identifying as Sikh in the 2021 census. This demographic reality has often made Canada a focal point for Khalistan-related activities that India views as threats to its sovereignty and territorial integrity. 

The group Sikhs for Justice has been organizing non-binding independence referendums in various countries, including several Canadian cities. These events have been a persistent source of tension, with India viewing them as provocative interference in its internal affairs. 

Despite the resumption of trade talks, security concerns persist. As recently as October 2024, the RCMP warned that “Indian diplomats and consular officials based in Canada leveraged their official positions to engage in clandestine activities”. CSIS Director Dan Rogers also stated the agency must remain “very vigilant” against the alleged threat from India. 

The Economic Imperative: Why Both Nations Are Betting on CEPA 

Beyond the diplomatic reconciliation lies a compelling economic logic driving both countries toward a comprehensive trade agreement. 

Current Trade Landscape and Growth Trajectory 

• Current Trade Volume: Bilateral trade in goods and services reached US$23.66 billion in 2024, with merchandise trade accounting for nearly US$8.98 billion—a healthy 10% increase over the previous year. 

• Ambitious Target: The CEPA aims to elevate this to $50 billion by 2030, more than doubling current exchange levels. 

• Trade Balance: The relationship has largely been in Canada’s favor, particularly due to its C$16 billion in services exports. 

Strategic Economic Complementarities 

The India-Canada economic relationship is characterized by strong complementarities that create natural partnership opportunities: 

• Critical Minerals and Energy: Canada possesses substantial reserves of critical minerals essential for clean energy technologies, while India represents a massive market and manufacturing hub. Collaboration in nuclear energy is particularly promising, given Canada’s uranium resources and India’s growing civil nuclear sector. 

• Technology and Innovation: Both ministers have highlighted emerging technologies like artificial intelligence, quantum computing, and machine learning as pillars of future cooperation. 

• Supply Chain Diversification: The pandemic and recent global disruptions highlighted the perils of concentrated supply chains. Both nations see opportunity in diversifying their supply chains through mutual cooperation. 

Table: Key Sectoral Opportunities in India-Canada Economic Partnership 

The Road Ahead: Navigating Challenges Toward a Prosperous Partnership 

While the resumption of talks is promising, several challenges remain in negotiating and implementing a successful CEPA. 

Learning from India’s Other Trade Agreements 

India’s recently signed trade pact with the European Free Trade Association (EFTA) in March 2024 offers valuable insights into what Canada might expect in negotiations. The India-EFTA deal featured several innovative elements: 

• Investment-Linked Framework: EFTA nations committed to $140 billion in foreign direct investment and creating one million direct jobs in India over 15 years. 

• Sustainable Development Chapter: The agreement included first-of-its-kind provisions on labor rights and environmental protection. 

• Gradual Tariff Liberalization: India offered tariff concessions on 95% of EFTA exports but implemented them gradually over 7-10 years to allow domestic industry adjustment. 

This pattern suggests Canada should anticipate an agreement that extends beyond traditional market access to include investment commitments, sustainable development, and phased tariff reductions. 

Persistent Diplomatic Sensitivities 

The Khalistan issue remains a potential fault line that could disrupt progress. As one commenter noted, “The ever growing issue of Khalistanis will always be a set back for the two countries, and also for the Indian diaspora in Canada”. The Canadian government will need to carefully balance its commitment to free expression with Indian concerns about territorial integrity and sovereignty. 

Competitive Positioning in India’s Trade Landscape 

Canada is not alone in seeking deeper economic engagement with India. New Delhi has been actively pursuing trade agreements with multiple partners, including: 

• Recently signed deals with the U.A.E., Australia, and EFTA 

• A completed trade pact with the U.K. (pending ratification) 

• Ongoing negotiations with the European Union 

This context means Canada must move strategically to secure competitive advantages in the Indian market before other partners establish stronger footholds. 

Conclusion: A Partnership of Strategic Patience and Promise 

The resumption of India-Canada FTA negotiations represents more than just trade diplomacy—it’s a testament to the resilience of international relationships and the primacy of economic interdependence even amid serious political differences. 

For Canada, a comprehensive deal with the world’s fifth-largest economy offers diversification beyond its traditional reliance on the U.S. market. For India, partnership with Canada provides access to critical resources, advanced technologies, and a strategic foothold in North America. 

The path to a successful CEPA will require negotiating skill, diplomatic sensitivity, and persistence from both nations. They must navigate not only complex market access issues but also the lingering geopolitical sensitivities that derailed their previous efforts. 

If successful, the India-Canada CEPA could become a model for how shared economic interests can bridge diplomatic divides and create prosperity that benefits both nations. As Minister Goyal aptly noted, “The strength of Canada and the strength of India together can become a force multiplier for businesses, for investors“. The journey toward that promising future has now begun anew.