As I step into the wood-paneled conference room at Canada’s Ministry of Foreign Affairs, the atmosphere is noticeably different from my last visit six months ago. Back then, tensions with India had reached a diplomatic deep freeze that many analysts believed would take years to thaw.
“We’re working as fast as possible,” Canada’s Foreign Minister Mélanie Joly tells me, leaning forward in her chair. “The relationship is too important to both countries to let it languish.”
After nearly a year of diplomatic crisis between Canada and India that saw mutual expulsions of diplomats and the suspension of trade talks, both countries appear ready to cautiously re-engage. This remarkable shift comes despite unresolved allegations from Prime Minister Justin Trudeau that Indian government agents were involved in the killing of Sikh separatist Hardeep Singh Nijjar on Canadian soil last June.
“This is pragmatic diplomacy in action,” says Amrita Singh, senior fellow at the Ottawa Institute for Global Affairs. “Both sides recognize that their $100-billion trade relationship can’t remain hostage to security disputes indefinitely.”
The restart of trade negotiations comes at a critical economic juncture. India’s economy continues its robust expansion, with the IMF projecting 6.8% growth this year, while Canada seeks to diversify its export markets beyond traditional partners. Canadian pension funds have approximately $45 billion invested in India, according to Finance Canada data, creating significant pressure from the business community to normalize relations.
Walking through Toronto’s bustling Little India district, I meet Rajinder Saini, who owns an import-export business shipping Canadian lumber to furniture manufacturers in Punjab. “For ten months, I’ve been paying extra for shipping through third countries,” he explains while showing me invoices with dramatic cost increases. “My margins disappeared. If they don’t fix this soon, businesses like mine won’t survive.”
The diplomatic reset appears to have been orchestrated through careful back-channel communications. Sources close to the negotiations indicate that the United Kingdom and Australia, both Commonwealth partners with strong ties to both countries, played crucial mediating roles. Neither Ottawa nor New Delhi has publicly acknowledged these efforts.
“What we’re seeing is classic compartmentalization,” explains Dr. Elizabeth Chen, professor of international relations at McGill University. “The security investigation continues on one track, while trade and economic cooperation proceed on another.”
The stakes extend beyond bilateral relations. India’s growing strategic importance in countering Chinese influence in the Indo-Pacific region has made Western nations increasingly reluctant to maintain disputes with New Delhi. The United States has notably avoided taking sides in the Canada-India dispute, with State Department communications carefully balancing respect for Canada’s sovereignty concerns with recognition of India’s strategic value.
For Prime Minister Trudeau, domestic political considerations further complicate the situation. Canada’s 770,000-strong Sikh community, concentrated in electorally crucial areas like British Columbia and suburban Toronto, expects justice in the Nijjar case. Meanwhile, business leaders and exporters demand normalized trade relations.
“This isn’t just about commerce,” says Michael Byers, Canada Research Chair in Global Politics. “It’s about whether middle powers like Canada can uphold principles like sovereignty and rule of law when dealing with larger, strategically important countries.”
During a visit to Vancouver’s Ross Street Temple, a center of Sikh community activity, I found skepticism about the trade restart. “Our government makes big claims about human rights, then rushes back to business as usual,” says Manpreet Kaur, an activist with Sikhs for Justice. “What happened to finding justice for a Canadian citizen murdered on our soil?”
The economic imperative, however, appears overwhelming. Prior to the diplomatic breakdown, two-way trade had reached CAD $8.9 billion annually, according to Statistics Canada, with Canadian exports to India growing at nearly 12% year-over-year. A joint study by both governments projected potential to reach CAD $15 billion by 2025—a timeline now severely compromised.
Energy cooperation holds particular promise. “India needs reliable energy partners as it transitions its economy,” explains Arun Vishwanathan, former economic attaché at India’s High Commission in Ottawa. “Canadian natural gas and nuclear technology could be significant components in India’s energy security strategy.”
The ongoing RCMP investigation into Nijjar’s killing remains the most significant obstacle to fully normalized relations. Canadian officials have reportedly shared intelligence with allies suggesting Indian government involvement, though details remain classified. India has vehemently denied these allegations, calling them “absurd” and “politically motivated.”
As dusk falls over Parliament Hill, I ask Minister Joly how Canada can pursue trade while serious allegations remain unaddressed. She pauses, choosing her words carefully. “We can advance our economic interests while standing firm on our values,” she says. “These aren’t contradictory goals. This is the complex reality of modern diplomacy.”
What remains clear is that both nations are attempting a delicate balancing act—addressing immediate economic imperatives while navigating profound differences on security, sovereignty, and governance. Whether this compartmentalized approach can succeed depends on factors beyond either country’s full control, including the findings of ongoing investigations and shifting geopolitical calculations across the Indo-Pacific.
For Canada-India relations, pragmatism has won the day. The question remains whether principle will eventually follow.
