India & Canada: Measured and Cautious Diplomacy

After a bitter two-year diplomatic standoff between India and Canada, both countries have adopted a measured and incremental approach to resetting their relationship. India has welcomed a change in leadership in Canada, particularly encouraged by Prime Minster Mark Carney’s push for Canada to diversify its trade and to explore opportunities to build up its relationship with India.

Prior, tensions were very high as a result of former Prime Minister Justin Trudeau’s announcement that India was involved in the assassination of Canadian citizen and Khalistani leader, Hardeep Singh Nijjar in Surrey, BC in June 2023. At the time, the CBC noted that Trudeau’s claim would have “seismic effects on an already shaky bilateral relationship.” However, with new leadership in Ottawa, and the diversification of trade on the agenda, in April 2025, India’s Prime Minister Narendra Modi, congratulated Carney for winning the election and in a post on X spoke to strengthening the India-Canada partnership and “unlocking greater opportunities for our people.”

This reproachment has opened up space for renewed India-Canada engagement despite a background of long-standing mutual mistrust. Indeed, there have been contentious issues involving Canada’s claim of Indian foreign interference in Canada and Indian claims that Canada turns a blind-eye to Khalistani diasporic groups and their anti-India activism. Nevertheless, the two countries now appear to have adopted a path of cautious diplomacy or, to use Foreign Affairs Minister Anita Anand’s recent words, “a step-by step approach to deepening diplomatic engagement and advancing bilateral cooperation with India.”

The expectation is that this will help revive mutual trust, lost as early as 1974 when Canada felt betrayed by India’s detonation of a nuclear device made in part with Canadian materials and then further weakened when India felt betrayed by Canada’s mishandling of the 1985 Air India bombing and Khalistani diasporic activities. This legacy of mistrust was further accentuated by the war of words and a diplomatic standoff between the two countries during the past two years.

Trade uncertainty and new partnership opportunities

Despite the ups and downs, Canada and India share over 75 years of diplomatic relations. Given the significant Indian diaspora in Canada, the country’s largest non-European ethnic group, people-to-people links remain at the core of Canada-India relations. India is also Canada’s largest source country for most immigration categories, including 392,810 study permit holders with Indian citizenship in Canada in 2024. More than a quarter of new permanent residents arriving in Canada in 2024 were also from India – by far more than from any other country. Moreover, in 2024, India was Canada’s seventh-largest goods and services trading partner, with two-way trade coming to $30.9 billion while more than 600 Canadian firms currently operating in India. As a result, India is of critical importance for Canadian exports given its rise as a global economic power (now the third largest economy in the world) and its rapidly expanding middle and upper-middle-income population.

Both India and Canada are also currently incentivized by the transformed geopolitical environment and Trump’s tariffs to look beyond the US to build trade relationships. Indeed, the US is both India’s and Canada’s largest trading partner. While Canada was among the earliest targets of Trump’s tariffs, India initially believed it could avoid them. Why? In particular, because Modi was one of the first leaders to be invited to the White House where both leaders agreed to double the $190 billion trade between the two countries by 2030. India was also the first country to start trade negotiations with the US and to voluntarily reduce its own tariffs as a goodwill gesture. But now, quite suddenly, India finds itself subject to 50 percent tariffs (25 percent retaliatory tariffs plus a 25 percent penalty for buying Russian oil). Tensions have further escalated with India’s insistent denial of Trump’s claim to have negotiated the cease-fire that ended the India-Pakistan four-day conflict in May 2025. As a result, India is pivoting back to a multi-alignment foreign policy with diverse actors, maintaining its strategic autonomy and furthering its engagement with China.

As for Prime Minister Carney, he has called for a new era in Canadian foreign policy: reconciling values with interests and economic diplomacy. He has also described the present as a hinge moment, which requires deeper, more secure and reliable alliances as well as securing independence from the Trumpian monetized US hegemony. Canada also asserts that the economy is its primary focus in the Indo-Pacific, its second largest regional export market and trading partner after the US.

Rebuilding mutual trust

Prime Minister Modi’s attendance at the G7 summit in Alberta in June 2025, presented a strategic opportunity for Canada and India to formally reset their relationship. Carney described his meeting with Modi as “foundational” and a necessary first step while Modi qualified the meeting as excellent, emphasizing that relations between the two countries were extremely important and that they hoped to work together to make progress in many areas. They also announced constructive action towards collaboration in areas such as energy security, food security, critical minerals and Artificial Intelligence, as well as the re-appointing of High Commissioners who had been withdrawn, following the diplomatic spat, in 2024.

All of this was the culmination of a process that had begun in earnest six months before, following Trudeau’s retirement in early January. Accordingly, India would make the first move, softening its anti-Canada stance and engaging Canada by laying the groundwork for cooperation in dealing with transnational crime.

In early January, for example, a team from the RCMP met with Indian law enforcement officials. They discussed cooperation between the two countries to tackle organized criminal gangs, the Khalistan issue and the pursuit of the Nijjar investigation. In February, the resumption of communication through security channels led to India raiding the residence of Simran Panesar, one of the suspects sought by Canada in the 2024 Pearson airport gold heist.

Furthermore, in mid-March, India’s national daily Hindustan Times had reported that both countries were already mulling over the restoration of High Commissioners and that Dinesh Patnaik from India and Christopher Cooter from Canada were being considered for the two positions, and that these appointments would be preceded by a meeting of the top leadership of both sides to signal the resetting of relations.

After the G7, India felt encouraged and vindicated when CSIS released its annual report on 20 June, acknowledging for the first time that “since the mid-1980s, the politically motivated violent extremism threat in Canada has manifested primarily through Canada-based Khalistani elements seeking to use and support violent means to create an independent nation” in India. The report, also connected Indian foreign interference in Canada to “real and perceived Khalistan extremism emerging from Canada”.

A few days later, Canada would make another important gesture when Minister of Public Safety, Gary Anandasangaree joined India’s Union Minister Hardeep Singh Puri at the 40^th year commemoration ceremony of the bombing of Air India Flight 182 held in Ireland. Anandasangaree also acknowledged that the bombing, resulting in the deaths of all 329 passengers on board, remained “the single worst act of terrorism and mass murder in Canadian history”.

Following a visit to India by Canada’s Assistant Deputy Minister (Indo-Pacific) Weldon Epp in July, Indian and Canadian representatives then held several meetings in Ottawa and Toronto behind closed doors where it was suggested that both countries work together in niche sectors such as Agri-tech, AI, LNG and critical minerals.

On 30 July, Canada appointed Jeff David as Consul-General in Mumbai, to be followed on 28 August by India and Canada finally announcing the appointment of Dinesh Patnaik and Chris Cooter as their respective High Commissioners. Then, on 22 August, the 2025 Assessment of Money Laundering and Terrorist Financing Risks in Canada was released, reiterating concerns the Canadian Security Intelligence Services (CSIS) had regarding Khalistani extremist groups in Canada. The report noted that these groups, which had previously run extensive fundraising networks in Canada, had now transitioned “to smaller pockets of individuals with allegiance to the cause but seemingly no particular affiliation to a specific group.” In particular, CSIS noted that organized crime and extremist groups were using diverse fundraising methods to evade detection and disruption.

Moving forward while addressing challenges

Neither Canada or India is in a hurry to fix everything in their broken relationship. This measured approach is intended to accomplish two objectives: first, to fully overcome the legacy of mutual distrust and second, to work through four extremely pressing and difficult challenges faced by both countries.

First, while the Carney government has refrained from commenting on the Nijjar killing case, citing an ongoing judicial process, India will have to respond to Canada’s worry about its transnational repression and foreign interference, an issue raised as well by the US, Australia and recently the UK. Despite some recent encouraging developments in Canada, the Nijjar issue is not going to disappear. Nevertheless, given the shifting global order, one can anticipate that Canada will follow the example of the US, the UK and Australia to pursue the Nijjar issue through background channels as well letting the matter work through the Canadian justice system.

Second, Canada’s economic vulnerability does not allow the country to let diasporic issues dominate its public discourse, which occurred during Canada’s last election campaign. Indeed, both the Liberals and the Conservatives had to deal with alleged foreign interference issues – the Liberals barring Chandra Arya from running in the leadership race over alleged ties to India and the Conservatives dropping Don Patel for endorsing shipping people to India to face retaliation from the Modi government.

Third, given the Modi’s government’s policy of zero tolerance for terrorism, which includes both Pakistan-based groups and Khalistani supporters, Canada will need to manage its Indo-Canadian diaspora, especially its two major communities, Sikhs and Hindus.  Although not unified in terms of their values and agendas, some members of these multi-generational communities are long-distance nationalists seeking liberal rights from the host country while mobilizing support for radical causes in India. As a result, Canada will have to balance the democratic right of freedom of speech and association, while maintaining a zero tolerance for violent or hate speech.

Fourth, looming in the background is the reality that Canada’s relationship with India will require the balancing of interests and values. As the Canadian government notes, “free trade negotiations between Canada and India have been pursued periodically since 2010,” but have stalled. Restarting them, given the growing illiberalism in India under Prime Minister Modi, will be a test for both sides. Further complicating matters is the recent rekindling of India-China relations, a by-product of the unprecedented disruption in India-US relations. Canada remains wary of China and it is yet to be seen how China figures in Canada’s foreign policy and whether India’s and Canada’s approaches towards China coincide.

Today, both India and Canada are looking at a long road towards resetting and deepening their relations. Some essential first steps have been taken but Canada’s prudent handling of Khalistani diasporic activities will carry significant weight for the Modi government. Until a proper understanding emerges between the two countries about their respective challenges in this thorny domain, diplomatic relations will remain fragile.