New Delhi: Ongoing diplomatic tensions between India and Canada are not expected to impact trade because it is primarily conducted between private partners, a senior government official said on Wednesday.

Unless restrictions are imposed by either country, trade will continue as usual, commerce secretary Sunil Barthwal said. “Trade is conducted between private entities and will persist despite the diplomatic tensions.”

“The export-import activities of countries are guided by economic rationale. Trade proceeds as usual unless specific countries impose sanctions, such as the US sanctions on Russia or the EU’s (European Union) sanctions on other nations.”

“Economic trade between these two countries continues to be conducted by importers and exporters based on value chains. These transactions are managed by private entities. If the law prescribes a prohibition on trade, then the situation would be different. But as of now, no such developments have occurred.”

Also read | Rift with Canada sparks uncertainty over movement of people, infra investment

India’s relations with Canada hit a new low on Monday when New Delhi withdrew some of its diplomats from Ottawa and expelled several Canadian diplomats.

This decision followed Canada’s designation of some Indian diplomats as “persons of interest” in the investigation into the killing of Khalistan activist Hardeep Singh Nijjar, which New Delhi described as “preposterous” and part of the government’s vote bank politics.

The Canadian diplomats have been instructed to leave India by or before 11:59pm on 19 October, according to the ministry of external affairs (MEA).

In FY24, India’s total merchandise exports amounted to $437.07 billion in value terms, while imports reached $678.22 billion. Of that, India’s merchandise exports to Canada stood at only $3.85 billion in FY24, with imports at $4.55 billion, compared with $4.11 billion in exports and $4.17 billion in imports in FY23.

Also read | Mint Primer | The escalating India-Canada rift and its implications for India

In addition, Canadian pension funds have invested over $45 billion in India, making Canada the fourth-largest source of foreign direct investment (FDI) in the country by the end of 2022.

Key sectors for Canadian pension fund investments in India include infrastructure, renewable energy, technology and financial services.

India imports lentils from Canada, but after relations soured last year over allegations of Indian involvement in the Nijjar killing, Canada lost a significant share of the pulse import market.

In 2023, India imported 687,558 tonnes of lentils from Canada, accounting for 45.41% of its total lentil imports, while Australia supplied 775,994 tonnes, representing 51.25%.

In 2024, Australian lentil exports have surged to 366,433 tonnes, making up 66.3% of India’s total lentil imports from January to July alone, according to government data. By contrast, Canada exported only 145,735 tonnes of lentils to India during this period, amounting to a mere 26.4% of imports. India’s total import of red lentils (masur) stood at 1.51 million tonnes in calendar year 2023.

Read more | Justin Trudeau will use the RCMP and Interference Commission to unilaterally indict India