(MENAFN- Live Mint) India and Canada have agreed to formally resume talks on an ambitious Comprehensive Economic Partnership Agreement (CEPA), as Prime Minister Narendra Modi and his Canadian counterpart, Mark Carney, met on the sidelines of the G20 Leaders' Summit in Johannesburg on Sunday. The development underscores the continuing improvement in relations between the two countries.

Following the Modi-Carney meeting, Canadian Foreign Minister Anita Anand stated on Monday that Canada and India will act swiftly on the trade deal, marking a shift in relations following two years of strained ties, according to news agency AP.

Also Read | India, Canada agree to start Comprehensive Economic Partnership talks

Anand noted that Ottawa has a new foreign policy in response to US President Donald Trump's trade war and highlighted Carney's aim to double non-US trade within ten years.

1-Revival in ties improves investor confidence

Easing diplomatic tensions improves investor confidence. The cooling of tensions is a sign of political stability, which reduces the perceived risk for Canadian pension funds, banks, and corporations considering long-term investments in India.

A revival in India-Canada economic and strategic engagements - especially through institutional investors, pension funds, and trade-focused agencies - can have a significant ripple effect across India's capital markets and investment ecosystem.

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A revival in India-Canada economic and strategic engagements - especially through institutional investors, pension funds, and trade-focused agencies - can have a significant ripple effect across India's capital markets and investment ecosystem.

India said it aims to increase bilateral trade to $50 billion by 2030. Experts said $50 billion export is not just an economic milestone but signals a 'recalibration of trade priorities designed to build resilience and expand high-value sectors.'

“Real progress will depend on restoring strategic trust, and the groundwork being laid today reflects an attempt to undo much of the diplomatic strain experienced during the previous Canadian government,” Prof Sanjal Shastri, Faculty of International Studies, FLAME University, told LiveMint.

2- India as a growth market

Funds like CPPIB, CDPQ, and OTPP have substantial investments in Indian infrastructure, real estate, and renewable energy. A reset between India and Canada could accelerate pending proposals and new commitments.

Trade experts said the renewed diplomatic engagement has already raised expectations across the industry.“India and Canada resuming FTA (free trade agreement) talks is a highly positive signal for exporters,” Ajay Sahai, director general, Federation of Indian Export Organisations (FIEO), told Mint recently.

“Faster market access and lower tariffs can unlock real opportunities for Indian sectors like textiles, engineering goods, pharma and agri-products,” he said

Reports said that the Canadian side, however, set a target of $70 billion by 2030. The gap between India's and Canada's targets reflects Canadian businesses' bullish assessment of the Indian market's potential. In 2024, bilateral trade between India and Canada in goods and services was around $22.6 billion, according to official numbers shared on the website of Consulate General of India in Toronto

Remember, Canada and India launched talks about fifteen years ago for such a trade deal, but it was downgraded to a sectoral deal that would touch only specific industries

Canada, being highly trade-dependent, exports over 75 per cent of its goods to the US. While most US exports are protected under the United States–Mexico–Canada trade agreement (USMCA), this deal is set for review in 2026.

India and Canada are finalising a deal to supply New Delhi with uranium, a further sign of warming ties after two years of strained diplomatic relations, according to The Globe and Mail.

Also Read | India, Canada look to rebuild trade ties after diplomatic rift

The deal is likely to be worth approximately $2.8 billion, with a term of 10 years, according to individuals familiar with the development. The terms of the deal may be modified before the announcement, they added.

3- Long-term stability

Trade talks between the two nations were suspended in late 2023 after then Canadian Prime Minister Justin Trudeau accused Indian government agents of possible involvement in the killing of Canada-based Khalistan separatist Hardeep Singh Nijjar - a claim India rejected as“absurd.”

The two countries have since moved to reset relations following the change of leadership in Ottawa in March.

In June, Modi met Carney at the G7 summit. The foreign ministers of both countries have met three times this year. And Canada's trade minister also visited India this month

“The long-term stability in India-Canada relations will, however, hinge on Canada's willingness to take tangible action against anti-India extremist elements that undermine bilateral confidence,” Prof Shastri said.

4- Stronger capital flows into India

Canada positions itself as a major player in climate finance. A renewed engagement could mean more funds earmarked for renewable energy, battery storage, and green hydrogen, they said. It would also mean direct Canadian support for India's energy transition goals and participation in blended finance projects with Indian banks.

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Canada, being highly trade-dependent, exports over 75 per cent of its goods to the US. While most US exports are protected under the United States–Mexico–Canada trade agreement (USMCA), this deal is set for review in 2026.

“If this reset continues meaningfully, renewed Canadian interest could unlock stronger capital flows into India through investment in technology, clean energy, and services, complementing India's manufacturing and digital-innovation strengths,” Prof Shastri said.

5- India-Canada trade volume

Over the years, India and Canada have developed a growing trade relationship, with bilateral trade encompassing goods such as energy, precious stones, machinery, and agricultural products. Canada exports a considerable amount of oil, lumber, pulses, and machinery to India. India's exports to Canada include pharmaceuticals, textiles, automotive parts, and IT services

Real progress will depend on restoring strategic trust.

One critical space, however, to watch is higher education, according to Prof Shastri. Student mobility and institutional collaborations represent one of the largest bridges between our two countries, he said.

“We may see positive developments enabling smoother academic pathways and research partnerships. Ultimately, deeper economic and educational cooperation could create a mutually beneficial model that supports economic expansion while strengthening people-centric diplomacy,” Prof Shastri told LiveMint.

(With agency inputs)

Key Takeaways

• Improved diplomatic relations boost investor confidence and open up new investment avenues.
• A target of $50 billion in bilateral trade by 2030 signals a recalibration of trade priorities.
• Renewed engagement could lead to stronger capital flows into India, particularly in renewable energy and technology.

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