Amid the turmoil between India and Canada, the relations between the countries are at its lowest point. The bilateral trade relation is also getting adversely impacted as the talks on a trade deal between the two countries have been paused. Will the investments and businesses be impacted?
Notably, Canada plays a vital role in shaping the financial and technology sector in India. It is the 18th largest foreign investor in India with a cumulative investment of USD 3306 million from April 2000 to March 2023, according to Invest India. The country’s investments represented 0.5 percent of the total FDI inflows in the country.
Moreover, more than 600 Canadian companies have a presence in India and over 1000 Canadian companies are actively pursuing business in the Indian market. Notably, India was Canada’s 9th largest trading partner in 2022. And now amid the turmoil between the countries, the business in which they invest and operate might have to deal with the waves of uncertainty. Here is all you need to know about the India-Canada relations and its impact on the business.
India-Canada Bilateral Relations
In November 2022, the Canadian government unveiled its Indo-Pacific Strategy which recognizes India as a crucial partner and aims to improve Canada’s market access by negotiating and implementing new comprehensive free trade agreements with Indo-Pacific nations, including India. Both the countries are also discussing a Comprehensive Economic Partnership Agreement (CEPA) and a Bilateral Investment Promotion and Partnership Agreement (BIPPA/FIPA).
India-Canada CEO Forum has also been constituted to improve bilateral trade and investment flows. According to Invest India, the Forum identified natural resources, infrastructure, education, information and technology and financial services as priority sectors.
“Bilateral trade in goods amounted to USD 8.16 billion in FY 22-23 with India’s exports to Canada amounting to $4.11 billion and India’s imports from Canada amounting to USD 4.05 billion,” Invest India informed.
Canadian investments in India
Canadian companies invest in several key sectors of the Indian economy like financial services, financial technology, infrastructure, information technology, and more. Notably, Services and infrastructure together accounted for 40.63 percent of total Canadian FDI into India. Some of the prominent Canadian investments in India include:
- Fairfax Financial Holdings Limited: It is a financial holding company based in Toronto, Ontario. In 2015, it launched an investment holding company, Fairfax India Holdings Corporation, focused solely on potential Indian businesses. As of 2021, Fairfax India had investments in India across IIFL Holdings, Fairchem Specialty, Bangalore International Airport, Sanmar Chemicals Group, National Collateral Management Services, Catholic Syrian Bank, Saurashtra Freight, the National Stock Exchange, etc.
- British Columbia Investment Management Corporation: It is a leading provider of investment management services for British Columbia’s public sector and one of the largest asset managers in Canada. It made its first direct physical investment in India with co-investors in Tower Infrastructure Investment Trust (Reliance Jio’s assets). It has a partnership with True North for private equities and with Quantum Advisors for public equities.
- Sun Life Financial Inc.: The company holds 49 percent stake in a Life Insurance Joint Venture (Aditya Birla Sun Life Insurance, was founded in 1994) with global conglomerate, Aditya Birla Nuovo Limited. In Oct 2021, this JV completed its Initial Public Offering (IPO), reducing Sun Life’s stake to 36.5 percent. It is the 7th largest insurance company and has the 4th largest mutual fund operation in India. Sun Life Financials’ Asia Service Centre (ASC) recently repositioned itself as Sun Life Global Solutions and opened a new state-of-the-art facility in Gurgaon in 2019 and one in Bengaluru in 2023 to support the company’s global operations.
- CPP Investment Board: It has made several investments in India, in a variety of sectors, including an IT park, an infrastructure investment with L&T, an alliance with Piramal Enterprises Limited to provide structured debt financing to residential projects across India’s major urban centres, and a significant investment in financial services through an ownership interest in Kotak Mahindra Bank. They recently hit a milestone of USD 14.8 Billion in investments into India.
- CDPQ: It has made several quality investments in India across financial services (Edelweiss Group and Kotak Mahindra Bank), real estate (Piramal Enterprises), logistics (TVS Logistics), renewable energy (Azure Power Global and Apraava Energy), GIP’s road platform. It has invested a total of USD 6 bn in India as of December 31, 2022.