With A Recession Looming Over Its Head, Should Canada Risk Its Trade Ties With India?

At a time when Canada may soon enter a recession, its diplomatic ties with India is facing challenges which may fuel further complications impacting their trade ties. The bigger question is, is it worth the risk?

Canada may slip into a recession in the coming months as the economy unexpectedly contracted in the second quarter at an annualized rate of 0.2% and growth was most likely flat in July.

"With monetary policy the tightest in real terms since 2009, and the most restrictive among G7 countries, we continue to anticipate economic lethargy over the next twelve months. We expect growth of 1.0% in 2023 and 0% in 2024," said Matthieu Arseneau, deputy chief economist at National Bank of Canada.

From an economic stand point, with a slowing economy and high inflation, Canada may be on the brink of a recession and that may not be favourable for Prime Miniter Justin Trudeau as election nears.

By the time the next election is due in 2025, Trudeau will have been in power for 10 years, and Canadians could be in the mood for a change.

Trudeau has won three elections and has been head of the government for 7-1/2 years, but his main rival, Conservative leader Pierre Poilievre, has often led in opinion polls since he became leader of his party last year amid high inflation and a housing shortage.

A cost-of-living crisis, a sharp rise in interest rates, and a chronic housing shortage have given the opposition ammunition to attack Trudeau, accusing him of feeding price increases with profligate government spending, calling it "Justin-flation."

India and Canada, which earlier this year said they could agree the outlines of a trade deal by the end of 2023, have now frozen talks on the agreement. Canada gave few details while India cited "certain political developments".

India is Canada's tenth largest trading partner and plans for a trade deal have been in the pipeline for over a decade. But by halting any kind of trade talk, complications may fuel-up between the two countries.