Canada to impose sanctions on India? Experts say ‘sick man’ shouldn’t punch above its weight

Amid the deepening diplomatic crisis between New Delhi and Ottawa over the killing of Sikh separatist leader Hardeep Singh Nijjar, Canadian Foreign Minister Mélanie Joly stated that sanctions on India ‘remain a possibility.’

“Everything is on the table,” stated Joly, when asked about potential sanctions on India.

Earlier, Canadian Prime Minister Justin Trudeau accused India of supporting criminal activities targeting Canadian citizens. He voiced strong concerns over “clear and compelling evidence” of the involvement of the agents of India in activities threatening public safety.

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However, India'sforeign ministry, earlier on Monday (Oct 14) saidthat Ottawa had not shared "a shred of evidence" with the Indian government despite several requests.

Is Canada punching above its weight?

Following Canada’s cold warning to India, WION reached out to economists seeking their opinion on who will be the ultimate loser if Ottawa green-lights economic sanctions against India, the world’s fifth-largest economy.

Sankhanath Bandyopadhyay, economistat InfomericsRatings, told WION that imposing sanctions on India would be like shooting itself in the foot for Canada.

He said Canadian businesses are heavily invested in India given the high rate of growth and returns.

“Canadian pension funds have cumulatively invested over CAD 75 billion in India and see India as a favourable destination for investments. More than 600 Canadian companies have a presence in India, and more than 1,000 companies are actively pursuing business in the Indian market,” Bandyopadhyay pointed out.

He highlighted how the sanctions could backfire in the agriculture sector, particularly Canada’s lentils export to India.

Canada is India's main source of imported lentils, a protein-rich staple used to make dal curry.

“Canada risks losing its market share for lentils to competitors such as Australia.As Australia's production grows and Canada's production experiences a shortfall, the market is becoming increasingly competitive. Since 2019, Australia has steadily increased its lentil exports to India. Although the impact on Canadian lentil exports has not yet been significant, any further escalation in diplomatic tensions could erode the confidence of Indian importers, who now have the option to turn to Australian suppliers,” he added.

He added that Canada holds little leverage against India, with its contribution to India’s Foreign Direct Investment (FDI) being a mere 0.57 per cent.

Amit Agrahari, Public Policy Executive at iSPIRT Foundation, told WION that Canada is the sick man of the Americas and it can’t afford to lock horns with India, a geopolitical as well as economic heavyweight.

“For the last nine quarters, Canada has been unable to post even 1 per cent of GDP growth. With negative growth in Q4 22 and Q3 23, Canada flirted with recession two times in the last three years,” Amit highlighted.

He said Canada in fact needs India on its side to diversify its energy buyer base.

“Canada wants to sell its oil to Asian countries, including India, to diversify its buyer base away from the United States,” he said.

“Canada can ill-afford sanctions from any country given its economy is alreadyondownhill.”