Montreal – India should be a priority market for Canada, yet this relationship remains vastly underdeveloped. A comprehensive trade deal could strengthen economic relations, but finalizing negotiations will be difficult because the most promising areas are also the most politically sensitive, according to a new study from the IRPP.

Economic links between Canada and India have grown quickly in recent decades but remain weak, say authors Someshwar Rao and Stephen Tapp. Looking ahead, several factors suggest considerable untapped potential for this relationship. The two countries can leverage strong social ties because of the large Indian diaspora in Canada; they also share a common business language, and have similar legal systems and democratic political institutions.

Still, the authors caution that many of India’s potential strengths could turn into weaknesses if they are not properly managed: “India’s economic growth outlook is among the most favourable in the world but action is needed on several fronts, including to develop the country’s infrastructure, combat corruption and improve government bureaucracy, encourage female labour force participation, and enhance education and health outcomes.”

Rao and Tapp argue that finalizing a comprehensive economic partnership agreement (CEPA) could open the door to a stronger economic relationship. Canadian sectors that would likely benefit the most are natural resource industries and providers of high-value services such as finance and education. Consumers and businesses in both countries could enjoy more product variety and lower prices. Nevertheless, Canadians would likely face adjustment challenges in some business services and in lower-wage, labour-intensive manufacturing.

If a grand bargain is not feasible, then in a less-ambitious trade deal, Canada might allow temporary migration of skilled Indian labour (subject to a cap) in exchange for better access to the Indian market for Canadian investment or services. However, the authors stress that, even without a trade deal, existing personal and business networks could be better leveraged.

Finally, Rao and Tapp note that this should be considered a long-term priority. It is important to set reasonable expectations for what can be accomplished in the near term. “The potential rewards are large enough that the upsides for Canada should not be overlooked, but nor should they be oversold,” they conclude.

The Potential to Grow Canada-India Economic Linkages: Overlooked or Oversold? by Someshwar Rao and Stephen Tapp can be downloaded from the IRPP’s website (irpp.org).

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The Institute for Research on Public Policy is an independent, national, bilingual, not-for-profit organization based in Montreal. To receive updates from the IRPP, please subscribe to our e-mail list.

Media Contact:    Shirley Cardenas    tel. 514-594-6877    scardenas@nullirpp.org