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India and Canada sign terms of reference for comprehensive economic partnership
India and Canada signed terms of reference on March 2, 2026 to negotiate a Comprehensive Economic Partnership Agreement (CEPA). The framework will cover goods, services, investment, and intellectual property. Both nations aim to deepen trade ties strained by recent diplomatic tensions.
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Cause
Why Did This Happen?
India-Canada bilateral trade reached $3.9 billion in FY2024-25, with merchandise exports of $2.1 billion and services at $1.8 billion. However, relations deteriorated sharply in September 2023 when Canada alleged Indian diplomats were involved in the killing of Khalistani separatist Hardeep Singh Nijjar. This triggered diplomatic protests, mutual expulsions of diplomats, and visa processing delays affecting 1.2 million Indian students and workers in Canada. Despite tensions, both nations recognized mutual economic interests. Canada hosts 1.4 million Indian diaspora contributing $8.7 billion annually to Canadian economy. India is pursuing trade agreements with major economies — Australia (CECA operationalized), UAE, and UK partnerships already active.
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Outcome
What Exactly Happened?
Commerce Minister Piyush Goyal and Canadian Trade Minister Mary Ng signed the terms of reference (ToR) on March 2, 2026 via video conference. The ToR establishes negotiation framework covering merchandise trade, services, investment, intellectual property rights, government procurement, and dispute resolution mechanisms. Negotiating committees comprising officials from Commerce Ministry, External Affairs Ministry, and sectoral departments (pharma, IT, agriculture, manufacturing) will be constituted within 30 days. Target completion is 18 months, with first negotiating round scheduled for April 15, 2026 in New Delhi. Both ministers issued joint statement emphasizing commitment to 'rules-based, mutually beneficial' partnership. No tariff reductions were announced at this stage — ToR is framework-setting only.
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Impact
Who Is Affected and How?
A successful CEPA could increase bilateral trade from $3.9 billion to $8-10 billion by 2029 based on Australia CECA model. Indian IT services (currently $1.2 billion exports) gain market access — Canada plans 50,000 tech worker visas annually by 2027. Indian pharmaceuticals (40% of Canada's generic drug imports, valued $680 million annually) face potential regulatory harmonization reducing approval timelines from 18 months to 8-10 months. Canadian agricultural exports (canola oil $1.1 billion, wheat $340 million) will face reduced tariffs, benefiting Indian consumers through lower cooking oil prices (potential 8-12% reduction). However, Indian manufacturers face competition from duty-free Canadian goods. Services sector gains most — Indian IT, consulting, and business process outsourcing firms can establish operations more easily.
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Next
What Should You Watch For?
First negotiating round begins April 15, 2026 in New Delhi with both nations submitting initial trade schedules by April 1. Sectoral negotiations on services, investment, and IP will occur parallel to goods negotiations. Key milestones: agriculture schedule by June 15, goods schedule by August 30, services schedule by September 30, 2026. A mid-term review is scheduled for September 2026 to assess progress. Parliament's Trade Committee will review draft CEPA text by December 2026 for constitutional approval. Ratification requires 60-day notice before implementation. Watch for: potential exemptions for sensitive sectors (dairy, certain grains), labor mobility provisions for Indian workers, and IP protection standards for pharma. Diplomatic thaw indicators include visa processing normalization and student admission pace restoration by Q2 2026.
Key Facts
Key Players
- Piyush Goyal (Commerce Minister, India)
- Mary Ng (Trade Minister, Canada)
- 1.4 million Indian diaspora in Canada
Key Numbers
- $3.9 billion bilateral trade FY2024-25
- $2.1 billion merchandise exports
- $1.8 billion services exports
- 1.2 million Indian students/workers affected by visa delays
- Target $8-10 billion trade by 2029
- $1.2 billion IT services exports currently
- $680 million pharmaceutical exports to Canada
- $1.1 billion canola oil imports from Canada
- 50,000 tech worker visas planned annually
Key Dates
- March 2, 2026 - Terms of reference signed
- April 1, 2026 - Initial trade schedules submission deadline
- April 15, 2026 - First negotiating round in New Delhi
- June 15, 2026 - Agriculture schedule deadline
- August 30, 2026 - Goods schedule deadline
- September 2026 - Mid-term review
- December 2026 - Parliament Trade Committee review
- 18-month target completion for CEPA negotiations