The Indian government is reportedly unfazed by the escalating tensions with Canada, as indicated by sources within the Commerce Ministry. Officials emphasize that investments from Canada, particularly from public pension funds, are likely to persist, albeit through indirect channels. According to these sources, India remains an attractive market for investment, and funds will continue to flow, often routed via Singapore, Mauritius, or the Middle East.

In terms of trade, India and Canada's bilateral exchanges stood at approximately $19.4 billion in 2023. The trade balance showed a deficit of $3.25 billion in favor of Canada, primarily due to higher service exports. India's goods trade included exports worth $5.56 billion and imports totaling $3.8 billion. The government sources indicated that this trade volume is not substantial enough to raise significant concerns amid current diplomatic tensions.

These tensions have escalated following Canada's recent decision to expel six Indian diplomats, which was linked to allegations of a "targeted campaign" against Canadian citizens by individuals purportedly connected to the Indian government. This move came in response to India expelling six members of the Canadian High Commission in New Delhi.

Relations between India and Canada have been particularly strained since Canadian Prime Minister Justin Trudeau's allegations in September of last year, suggesting that Indian agents may have been involved in the assassination of Hardeep Singh Nijjar, who was shot dead in Surrey, British Columbia, in June. The Indian government has categorically rejected these claims as "absurd," further complicating diplomatic interactions.

Despite the ongoing tensions, the Indian government appears confident that trade and investment channels will remain open and robust, mitigating potential fallout from the current diplomatic rift.