India-Canada Feud Threatens Chill Over Billions in Investments

Sep 19, 2023 | blog

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(Bloomberg) — A diplomatic struggle between Canada and India over the homicide of a Sikh chief threatens to place a freeze on rising financial ties between the 2 nations, that are far wider than the circulate of products being shipped throughout the Pacific.

India is a comparatively small purchaser of Canadian commodities, nevertheless it’s an enormous issue within the schooling sector — it’s by far the biggest supply of overseas college students attending Canada’s schools and universities. Meanwhile, the largest Canadian public pension managers have poured tens of billions of {dollars} into Indian firms and tasks, together with renewable power, infrastructure and banks. 

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Three massive funds that collectively handle greater than C$1.2 trillion ($893 billion) — Canada Pension Plan Investment Board and pension funds for Quebec employees and Ontario faculty lecturers — have opened places of work in Mumbai or New Delhi lately. 

Canadian Prime Minister Justin Trudeau shocked the nation Monday by alleging that India was behind the homicide in June of a Sikh separatist chief in a suburb of Vancouver. India denied that it had something to do with the killing, calling the allegation “absurd.” Both nations expelled one of many different’s diplomats.

Read More: Trudeau’s Murder Claim Threatens to Upend US Courtship of India

The incident exposes a widening rift between two nations that, in monetary and financial phrases, had been rising nearer. Investments between Canada and India rose to C$36.2 billion in 2022, up 37% in 4 years, in accordance with Statistics Canada information. 

“The financial connections are very strong in both directions,” stated Vivek Dehejia, professor of economics at Ottawa’s Carleton University. The diplomatic row is extra more likely to have a “chilling effect” on funding flows between the 2 nations than have an effect on commerce, he stated.

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CPPIB, Canada’s largest pension supervisor, had $21 billion invested in India as of a couple of 12 months in the past, in accordance with its web site. One main funding, a 2.7% stake in Mumbai-headquartered Kotak Mahindra Bank Ltd., is price 96 billion rupees ($1.2 billion). It’s one in every of about 70 publicly traded Indian firms through which the fund has a stake, in accordance with a fund disclosure doc.

Caisse de Depot et Placement du Quebec had C$8 billion invested in India on the finish of final 12 months and Ontario Teachers’ Pension Plan stated it has greater than C$3 billion invested there. Spokespeople for the Caisse and Teachers declined to touch upon Tuesday. CPPIB didn’t reply to a request for remark.

The destiny of future investments may very well be referred to as into query if the struggle between the nations escalates. “If the spat really gets protracted and drags on for months, while Canada continues its investigation, I see that could have a dampening effect at the margin,” Dehejia stated.

Until just lately, the 2 nations had been in talks on a commerce deal. Those have now been placed on maintain.  

Canada exported C$11.6 billion price of products and companies to India final 12 months, lower than a 3rd of the worth of exports to China, in accordance with Statistics Canada. In July, the newest month for which numbers can be found, Canadian items exports to India had been led by commodities — lentils, metallurgical coal and newsprint exports. 

India’s largest items exports to Canada through the month had been smartphones and railway automobiles. The nation ranks twelfth on the checklist of greatest exporters to Canada. 

—With help from Erik Hertzberg, Mathieu Dion and Philip J. Heijmans.

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