Escalating tensions between India and Canada are unlikely to have a major impact on trade, but Canada’s tourism and education sectors may feel the pinch, according to a Moneycontrol analysis.

India’s trade with Canada is relatively modest, accounting for just 0.75 percent of India’s total trade in FY24. A mere 0.9 percent of India’s exports are headed to Canada, while 0.7 percent of imports to India originate from the North American nation.

The share of trade from Canada started declining long before tensions between the two countries escalated.

In FY16, Canada accounted for 1 percent of India’s total trade, with over $2 billion trade deficit between India and Canada. The trade deficit narrowed to $700 million in FY24.

On October 14, India expelled Canadian diplomats after the country noted that it was investigating Indian ambassador and other diplomats as “persons of interest” in the killing of a Sikh Separatist leader in 2023.

A 2021 RBI study showed that remittances from Canada accounted for just 0.6 percent of India’s $80 billion inflows.

The impact of growing tensions, however, will be felt more on Canada’s education and tourism sector.

The share of Indian students in study permits granted by Canada has gone up from 15 percent in 2015 to 41 percent in 2023.

Students with study permits have witnessed a ninefold jump during this period.

In the first seven months of the year, India accounted for 107,385 of the 278,250 student permits issued, representing 39 percent of the total.

Tourism is likely to be impacted as well. India was the fourth largest source of tourists headed for the North American country, accounting for nearly 400,000 tourists in the first 11 months of 2023.

In 2018, 297,000 tourists from India contributed Canadian $306 million to the economy, according to official reports, almost 70 percent more than Canadian $177 million spent in 2011.

Tourist inflows in India may not be as pronounced. Data shows that Canada accounted for 3 percent of tourist arrivals in India in 2019, but nearly three-fourths were of Indian origin. Of the 351,859 people who visited India in 2019, 73 percent belonged to the diaspora, and only 2.5 percent were in the country for leisure holidays and recreation.