Explained : From Rupture to Strategic Rebalancing and Its Impact

India–Canada relations over the past year offer a case study in how middle-power partnerships behave under geopolitical stress. The trajectory has followed a recognisable pattern. Political rupture came first. Institutional disengagement followed. Quiet security repair began thereafter. Economic re-engagement is now emerging as the most durable stabilising layer.

Viewed through media narratives, the relationship may still appear to be in recovery mode. Viewed structurally, however, a deeper recalibration is underway. The two countries are not merely attempting to restore diplomatic normalcy. They are moving towards building a more insulated, transaction-driven, and institutionally buffered partnership anchored in trade flows, long-horizon capital investment, energy security cooperation, technology partnerships, and structured security coordination.

The deterioration phase was not inevitable. It was accelerated by political and diplomatic choices during the tenure of Prime Minister Justin Trudeau and Foreign Minister Mélanie Joly. Public articulation of sensitive security concerns before investigative processes matured, and before diplomatic de-escalation channels were fully utilised, triggered immediate institutional consequences. Reciprocal persona non grata declarations involving senior diplomats, including the Indian High Commissioner to Canada, marked one of the lowest operational phases in bilateral engagement in recent decades.

Diplomatic expulsions create long bureaucratic memory across foreign ministries, intelligence establishments, and law enforcement systems. These institutional memories often outlast political leadership cycles. The current phase of engagement is therefore less about reconciliation and more about constructing durable institutional guardrails.

The more lasting damage was institutional rather than political. Diplomatic expulsions create long bureaucratic memory across foreign ministries, intelligence establishments, and law enforcement systems. These institutional memories often outlast political leadership cycles. The current phase of engagement is therefore less about reconciliation and more about constructing durable institutional guardrails.

2024: Political Shock, Economic Continuity

The last visit by a Canadian Prime Minister to India during the G20 Summit in 2023 took place under visible political strain. Public allegations by Canada regarding transnational criminal activity resulted in an immediate political contraction in bilateral space.

However, economic fundamentals demonstrated resilience. Canadian pension and institutional capital continued to maintain deep exposure to Indian infrastructure, logistics, renewable energy, and urban development sectors. Cumulative Canadian institutional exposure in India is widely assessed to be in the range of US$70–80 billion. Canadian pension funds remain among the largest foreign investors in Indian highways, logistics corridors, renewable energy platforms, and commercial real estate investment structures.

This continuity reflected a broader reality. Long-duration capital tends to track macroeconomic fundamentals rather than short-term political cycles.

2025: Beginning of Institutional Reset

The stabilisation phase began through quiet Foreign Office consultations between India’s Ministry of External Affairs and Global Affairs Canada. These engagements helped restore working-level communication channels and rebuild technical trust.

Leadership signalling continued through multilateral engagement. Prime Minister Narendra Modi’s participation in the G7 outreach meeting at Kananaskis ensured leadership-level communication did not collapse. A subsequent interaction on the margins of the G20 Summit in Johannesburg reinforced mutual signalling that controlled stabilisation was strategically desirable. Recovery then expanded across multiple layers of engagement.

Subnational diplomacy played a stabilising role. The visit of British Columbia Premier David Eby to India demonstrated that provincial trade, clean technology, and digital economy partnerships remained insulated from federal political tensions.

High-level political engagement resumed with the visit of Canada’s Foreign Minister Anita Anand. Discussions focused on restoring cooperation across trade, climate transition, energy security, science partnerships, agriculture supply chains, and mobility frameworks.

Economic institutionalisation deepened following the visit of International Trade Minister Maninder Sidhu during the 7th Ministerial Dialogue on Trade and Investment. The dialogue reaffirmed commitment to supply chain diversification, particularly in critical minerals, clean technology, and advanced manufacturing sectors. Mobility frameworks for skilled professionals and students re-emerged as a central pillar of long-term innovation partnerships.

The participation of Canada’s Artificial Intelligence Minister, Evan Solomon, at India’s recent AI Summit signalled Ottawa’s willingness to institutionalise cooperation in AI governance, standards-setting, and applied research partnerships.

Societal and knowledge-sector linkages were also reactivated. Delegations of Canadian university Presidents and senior academic leadership travelled to India. Education remains one of the strongest pillars of bilateral ties. Over 300,000 Indian students study in Canada annually, contributing approximately CAD 8–10 billion to the Canadian economy.

Movement towards finalising Terms of Reference for a Comprehensive Economic Partnership Agreement could represent the most consequential institutional step in bilateral economic relations. Bilateral merchandise trade currently stands at roughly US$8–9 billion annually, significantly below potential relative to economic size.

External Affairs Minister Dr S Jaishankar’s participation in G7 Foreign Ministers’ outreach engagements hosted by Canada reinforced India’s willingness to maintain strategic dialogue even during bilateral recalibration.

2026: Rebalancing Continues

By early 2026, the relationship shifted from diplomatic stabilisation to sectoral strategic convergence.

Energy emerged as the central axis. Canada holds the world’s third-largest proven oil reserves, exceeding 165 billion barrels. India imports over 85 percent of its crude oil consumption and is expected to remain among the world’s largest energy importers through 2040.

India’s LNG demand is projected to grow from roughly 65 BCM annually to potentially 110–120 BCM by the early 2030s. Canada’s west coast LNG export infrastructure is well positioned to serve Indo-Pacific demand growth.

Energy cooperation, therefore, is not merely commercial; it forms the strategic ballast of the broader reset, linking trade expansion, long-term capital flows, and political risk stabilisation into a single structural arc.

Uranium cooperation is likely to deepen as India expands nuclear capacity beyond its current 7.5 GW base, particularly with growing interest in Small Modular Reactor technologies to support low- carbon baseload power.

Agricultural trade continues to provide stabilising ballast. Canadian pulse exports to India historically range between US$600 million and US$1 billion annually, depending on domestic production cycles.

Security cooperation was significantly strengthened through the February 2026 visit of India’s National Security Advisor Ajit Doval to Canada. Agreements included law enforcement coordination frameworks, intelligence-sharing protocols, and liaison officer deployments. Cooperation areas include fentanyl precursor supply chains, transnational organised crime, cyber threats, and financial fraud networks.

The Carney Doctrine

Prime Minister Mark Carney’s expected visit to India is likely to represent a transition from stabilisation towards structured expansion in bilateral engagement.

Recent high-profile interactions between Carney and US President Donald Trump have provided insight into Carney’s negotiating doctrine. His calibrated willingness to disengage when discussions cross defined negotiating thresholds suggests a leadership style that is technocratic, boundary- driven, and strategically contained rather than personality-driven or theatrically confrontational.

Canada’s expanding engagement with India must also be viewed within its broader global positioning. With Canada–United States relations entering a more volatile phase, Ottawa appears increasingly inclined to diversify strategic and economic partnerships.

The signalling observed during these interactions reflects boundary-setting rather than disruption. It reinforces negotiating positions while preserving long-term engagement space. Transposed to India–Canada engagement, this suggests a negotiation style prioritising structured outcomes, institutional continuity, and long-horizon deliverables over public optics.

Movement towards finalising Terms of Reference for a Comprehensive Economic Partnership Agreement could represent the most consequential institutional step in bilateral economic relations. Bilateral merchandise trade currently stands at roughly US$8–9 billion annually, significantly below potential relative to economic size.

India’s economy is approaching the US$4 trillion threshold and is projected to cross US$5 trillion within this decade. Canada’s economy remains around US$2.1–2.2 trillion. Complementarities remain strong across pharmaceuticals, digital services, refined petroleum, engineering goods and speciality chemicals from India, and energy resources, potash, pulses, timber and agri-technology from Canada. A structured trade framework could potentially double bilateral trade volumes over a decade.

Technology collaboration is expected to expand across critical minerals, advanced materials, aerospace, AI-enabled manufacturing, digital public infrastructure, and clean technology ecosystems.

The Indian diaspora in Canada, comprising more than 1.8 million people of Indian origin, will remain a central stabilising factor across business, academia, technology entrepreneurship, and capital flows.

Strategic Hedging

Canada’s expanding engagement with India must also be viewed within its broader global positioning. With Canada–United States relations entering a more volatile phase, Ottawa appears increasingly inclined to diversify strategic and economic partnerships.

Engagement with major growth centres such as India, alongside calibrated engagement with China, reflects risk distribution rather than shifts in alignment. Carney’s Central Bank background reinforces a long-horizon, risk-distribution approach to external partnerships, particularly in capital flows, supply chain diversification, and energy security.

If current trends continue, the next decade of India–Canada relations may be defined less by political turbulence and more by investment integration, energy interdependence, supply chain cooperation, technology collaboration, and deepening people-to-people linkages.

India’s growth trajectory, energy demand profile, infrastructure absorption capacity, and innovation ecosystem make deeper engagement structurally logical for Canada.

The Real Test

The success of this phase will not be measured through joint statements. It will be measured through structural outcomes. Do trade negotiations move towards time-bound frameworks? Do energy engagements convert into long-term contracts? Do security dialogues become routine operational mechanisms? Do diplomatic missions regain full operational comfort?

India and Canada are not bound by geography or alliance structures. They are bound by economic complementarity, capital interdependence, and converging global governance interests.

If current trends continue, the next decade of India–Canada relations may be defined less by political turbulence and more by investment integration, energy interdependence, supply chain cooperation, technology collaboration, and deepening people-to-people linkages.

And in the longer arc of international politics, partnerships anchored in structural complementarity tend to outlast political turbulence.

Sanjay Kumar Verma is the Chairperson of the Research and Information System for Developing Countries and has previously served as India’s High Commissioner to Canada and Ambassador to Japan.

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