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Canada-India Entente in the 21st Century

Canada –India Entente in the 21st Century

In the 21st century, very little has changed over the last six centuries with regard to India’s relationship with the world. Columbus was on a quest to find a better route and discover commercial opportunities in India and, in the same vein, developed countries across the globe are looking to find new opportunities in India. Both endeavors have a common theme—economic opportunity, yet there is one major difference. During the Columbus era, it was the western country’s interest in rediscovering India but, in today’s era, India also has an interest. Presently, the relationship of benefits is ‘bidirectional’, not ‘unidirectional’, as it began to exist in the middle of the last millennia.

The coming visit of Indian Prime Minister Narendra Damodardas Modi to Canada is going to open a new vista in the Indian-Canadian relationship. It took nearly 40 years for an Indian Prime Minister to visit Canada (the last time was in the 1970s), even though India has been an integral part of Canada through its immigration policy. Last year, 33,000 Indians became permanent residents of Canada; more than 100,000 came as tourist and students.

Many stakeholders talk about the growing importance of India to Canada’s economy and the opportunity it presents, but, somehow, Ottawa has ‘missed the bus’ to Delhi. There are many reasons for the historical mistrust; such as Canada’s views on nonproliferation and the Sikh separatism in India, among others.

The historical connection between Canada and India dates back to the last century, yet it is not reflected on a bilateral level. Many Canadian political leaders have spoken about Canada-India bilateral relations. In the last century, Prime Minister Mackenzie King visited India in 1910 as Deputy Minister and later as Prime Minister. The King government advocated close cooperation with India. Canada played a pivotal role in encouraging India to join the Commonwealth. In 1950, Canada was the main architect of the ‘Colombo Plan’- a regional organization that embodies the concept of collective intergovernmental effort to strengthen economic and social development of member countries in the Asia-Pacific region. For the next 25 years, India was the main beneficiary of aid from Canada and there was a continuous dialogue between Canada and India during this period. However, India used the Canadian-supplied nuclear reactor to create plutonium for its nuclear test (‘Smiling Buddha’) in 1974. Outraged, Canada suspended all civic-lain nuclear assistance. From 1976 to 1995 there was a lull in the relationship between Canada and India.

Then Prime Minister Jean Chretien saw the changing face of the Indian economy and started renewing economic and political ties with India. In 1996, Prime Minister Chretien visited India with a large team of more than 300 people, which included representatives from companies, cabinet ministers, and provincial premiers. This was followed by a renewed focus by the present government, with Prime Minister Stephen Harper visiting India in 2012.

In the last two decades, changes in India’s economy have been outstanding. In terms of Purchasing Power Parity (PPP), India is today’s third largest world economy, after the USA and China. The IMF predicts India’s economy will grow more than 7 per cent in the coming years.

In 2014, bilateral trade between Canada and India stood at CAD $5.2 billion. Trade relations between both countries are quite minuscule when compared to Canada’s trading relations with the other top 10 countries. In 2011, Canada’s exports to India were CAD $2.6 billion, and imports from India reached CAD $2.5 billion. Canadian foreign direct investment in India was a meager half a billion dollars. Most of the trade is in specific commodities: agriculture, forestry, chemicals and metals. India is a top destination for Canadian peas, representing 50 per cent of total exports.

India’s rise in the global economy is shifting the international relations dynamics across the globe. The new clout of India (including the other BRIC (Brazil, Russia, India and China) countries) in terms of its economic growth is changing the established strategic order, and the recently formed Asian Infrastructure Investment Bank (AIIB) are the things to come.
India has changed in an extraordinary way. Millions of people have been lifted from poverty in India. India’s ‘demographic dividend’ adds muscle to its economic growth. Each year, India adds more population to the world, when compared to any other country. Twenty-five million babies are born in India every year. This means a population the size of Canada is created in India every 18 months.
The lucrative and booming middle class market in India offers many Canadian companies an enormous opportunity. India has a lot to offer, from a huge demand for Canadian goods and services to R&D collaborations. The list can go on and on, in terms of what India can offer to Canadian companies and vice versa.

Many new positive trends can already be seen in bilateral relations. In March 2013, the India Space Research Organization (ISRO) launched Canada’s first military satellites. This was the first time Canada had launched military satellites. The Canadian firm, Research in Motion, the creator of the iconic Blackberry mobile phone, is one of the many Canadian companies that have seen its fortune drop in the mobile market. The only market where the company beats Apple in sales is India. However, today the company sells more phones in India than in Canada. Canadian firms cannot only concentrate on the North American market for growth and development. They must look beyond geographic proximity.

India is a huge market, with many economic opportunities—a common theme among many companies in the developed countries. What does all of this mean for Canada?

The economic growth in the last two decades is putting pressure on India’s energy, water and food resources. India’s demographic advantage, combined with urbanization and a rapid demand for consumer goods and services, will increase consumption in India. However, it will pose new challenges, unprecedented in the history of India. Food, water, shelter, jobs, energy, infrastructure, and skill development are some of the few critical areas where Canada can play an important role.

Canada’s education system is fabulous; still, Canada attracts a fewer number of Indian students to its educational institutions as compared to the UK or Australia. The rise of the middle class has resulted in many Indian students going abroad to study. Every year, 2 million students from India go abroad for their education. Around 12, 000 students consider Canada as a destination for pursuing higher education, but Indian students have little recognition of Canada as an education destination. According to Canadian government, international students contribute CAD $7.7 billion dollars to the Canadian economy and created employment for 83,000 Canadians.

India has a large shortage of skilled manpower. Hardly 10 per cent of the workforce receives skilled training. The Indian government, National Policy on Skill, has identified the need to upgrade 500 million workforce skills and make India a productive economy. The government has also chalked out a plan to involve the private sector in providing skilled training in Public Private Partnerships. India is seeking international partnership and this allows Canadian organizations to participate in this booming market in the education sector.

India has a huge middle class, which has changed the consumer market. Defining a middle class in India is as problematic as defining poverty in India. The McKinsey study states India’s middle class is growing and constitutes 5-10 per cent of India’s population. India’s middle class is still larger than the population of Canada. That, in itself, translates to 70 million people in India, double the size of Canada’s population. According to The Organization for Economic Co-operation and Development (OECD), by 2020, half of the world’s middle class will be in Asia and the majority of them will be in India. At the same time, there has been a drastic increase in India’s urban population. According to the United Nations, India will add 497 million to the urban population and the projected increase will be higher than the past 40 years. The rise in urban population could add up to 1 per cent of India’s GDP growth.
This population increase is putting tremendous pressure on the demand for both the quantity and quality of food available in India. India is already witnessing a shift in demand for high value and a greater choice of food. To feed 1.3 billion people, India will have to increase its productivity and find new ways to increment the supply for food products in India. As one of the largest agricultural producers and exporters in the world, Canada is well placed to build its presence in the Indian market.
The increase in urbanization is putting a huge strain on India’s infrastructure. India is going to spend US $1.5 trillion on infrastructure in the coming decade, about half of which will go to road and power generators, which will create a multiplier effect across various sectors. This provides a vast opportunity for financial institutions and pension funds to invest in Indian green field infrastructure projects. Canada has 4300 companies involved in infrastructure exports, and can offer engineering and construction equipment, as well as environmental services, to the Indian market. Canadian firms have excelled in overcoming geographic and climatic challenges. Canadian companies have designed and built some of the best water treatment facilities, hydroelectric power and mass transits system in the world.

Moving forward in the 21st century, India has become a ‘key priority’ for Canada. Economic relations have taken primacy over political considerations. Thriving in the Indian market requires a clear understanding of India. This will help Ottawa to organize and manage the strategic challenges that will emerge while dealing with India.

India plans to invest $1 trillion in infrastructure spending in the next five years. While India imports merchandise goods and services worth $600 billion annually, why has Canada not been able to increase its trade with India? This is something policy makers in Canada have to ponder. India offers huge potential for Canadian companies. Canada should look beyond the traditional nuclear cooperation (uranium exports is one of these), when there are many areas where Canadian companies can tap the Indian market. The list could go on, but that is beyond the scope of this write up.

One thing is for sure, with the slowdown in the Canadian economy, there could not be a better time for the Indian Prime Minister to visit Canada. This opens up an exciting opportunity for Canadian companies, since, these companies ‘missed the bus’ in entering the Indian market in the last century. As the saying goes, ‘mistakes are meant for learning, not repeating’.