How India’s Exports to Canada are Growing and Diversifying: A 2000-Word Analysis
India and Canada have a long-standing and cordial relationship based on shared values of democracy, pluralism, and expanding economic engagement. India is one of Canada’s key partners in the Indo-Pacific region, and both countries have been working to enhance bilateral cooperation in various areas of mutual interest. Trade is one of the pillars of this partnership, and it has been growing steadily over the years.
The Value Of India’s Export To Canada
According to the United Nations COMTRADE database, India’s exports to Canada were valued at US$ 4.25 billion in 2022, up from US$ 3.79 billion in 2021, registering a growth of 12%. This makes India the 13th-largest merchandise trading partner and the 14th-largest destination for merchandise exports for Canada globally. The total bilateral trade, including goods and services, crossed US$ 11 billion in 2021.
India’s exports to Canada are diverse and cover a wide range of sectors, such as pharmaceuticals, iron and steel products, organic chemicals, pearls and precious stones, textiles and garments, machinery and equipment, electrical and electronic goods, fish and seafood products, vehicles and parts, furniture and lighting, railway and tramway equipment, coffee and tea, spices, cereals, oil seeds, leather goods, optical and medical apparatus, carpets and floor coverings, footwear, vegetable and fruit preparations, essential oils and cosmetics, toys and games, etc.
Major Exported Items
Some of the major exported items from India to Canada in 2022 were:
- Pharmaceutical products: US$ 418.12 million
- Articles of iron or steel: US$ 328.43 million
- Machinery, nuclear reactors, boilers: US$ 286.64 million
- Pearls, precious stones, metals, coins: US$ 245.79 million
- Organic chemicals: US$ 243.57 million
These five items accounted for about 35% of India’s total exports to Canada in 2022.
Diversification And Challenges
India’s exports to Canada have also been increasing in terms of value-added and high-tech products, such as pharmaceuticals, machinery, electrical and electronic equipment, vehicles and parts, optical and medical apparatus, etc. These products reflect India’s strengths in innovation, research and development, and manufacturing capabilities.
India’s exports to Canada have also been benefiting from the preferential market access granted by Canada under the Generalized System of Preferences (GSP) scheme. Under this scheme, Canada offers duty-free or reduced-duty access to imports from eligible developing countries like India for about 5,000 products. India is one of the largest beneficiaries of this scheme among all GSP countries.
India and Canada have also been negotiating a Comprehensive Economic Partnership Agreement (CEPA) since 2010 to further boost bilateral trade and investment. The CEPA aims to reduce or eliminate tariffs and non-tariff barriers on goods trade, enhance market access for services trade and investment flows, facilitate mutual recognition of standards and qualifications, promote cooperation on intellectual property rights protection, government procurement, competition policy, etc.
Impact Of The CEPA or EPTA.
The CEPA negotiations have been stalled for several years due to differences on some key issues such as agriculture market access, rules of origin, investment protection, etc. However, in March 2022, both sides agreed to formally re-launch the negotiations and also consider an Interim Agreement or Early Progress Trade Agreement (EPTA) that could bring early commercial gains to both countries. The EPTA is expected to be concluded by the second half of 2023.
The CEPA or EPTA could significantly enhance bilateral trade by lowering tariffs on a large number of products of interest to both sides. According to a joint study conducted by both governments in 2010, the CEPA could boost bilateral trade by US$ 4.4-6.5 billion (C$ 6-8.8 billion) and yield a GDP gain of US$ 3.8-5.9 billion (C$ 5.1-8 billion) for Canada by 2035.
The CEPA or EPTA could also create new opportunities for Indian exporters in sectors such as textiles and garments, pharmaceuticals, machinery, electrical equipment, vehicles, fisheries, agriculture, services, etc., where Canada has high tariffs or non-tariff barriers.
The CEPA or EPTA could also help address some of the challenges faced by Indian exporters in the Canadian market such as high transportation costs, long transit times, lack of direct shipping links, complex customs procedures, stringent regulatory requirements, lack of awareness, etc.
India’s exports to Canada have been growing steadily over the years and have become more diverse and value added. India has a strong potential to increase its exports to Canada further by leveraging its comparative advantages in various sectors and by taking advantage of the preferential market access offered by Canada under the GSP scheme. India and Canada should also expedite the conclusion of the CEPA or EPTA to create a more conducive and predictable trade and investment environment and to unlock new opportunities for bilateral cooperation.
Exports to Canada from India: An Overview
India and Canada have a long-standing bilateral trade relationship that has grown significantly in the past decade. According to the United Nations COMTRADE database, India exported goods worth US$4.25 billion to Canada in 2022, making it the 23rd largest export destination for India. The main export products from India to Canada include pharmaceutical products, articles of iron or steel, machinery, pearls and precious stones, organic chemicals, iron and steel, electrical and electronic equipment, textiles and clothing, plastics, vehicles, fish and seafood, and cereals .
Exports to Canada from India: Trends and Opportunities
The export value from India to Canada has increased by 39% from US$3.06 billion in 2018 to US$4.25 billion in 2022, showing a positive trend in the bilateral trade. The growth rate of exports from India to Canada is higher than the average growth rate of India’s global exports, which is 28% for the same period . Some of the factors that contribute to this growth are:
- The Comprehensive Economic Partnership Agreement (CEPA) negotiations between India and Canada, which aim to reduce tariff and non-tariff barriers and enhance market access for goods and services. The CEPA is expected to boost the bilateral trade by US$6 billion annually once implemented .
- The increasing demand for Indian products in Canada, especially in sectors such as pharmaceuticals, textiles, gems and jewellery, agriculture, and information technology. India has a competitive advantage in these sectors due to its low-cost production, skilled workforce, innovation, and quality standards .
- The diversification of export products from India to Canada, which reflects the changing consumer preferences and market opportunities in Canada. For instance, India has increased its exports of non-basmati rice, gems and jewellery, manufactured goods, engineered goods, chemical products, electronic goods, ores and minerals, leather products, handicrafts, etc. in recent years .
- The potential for further expansion of exports from India to Canada in emerging sectors such as renewable energy, clean technology, education, health care, infrastructure, aerospace, defence, and tourism. These sectors offer new avenues for collaboration and investment between the two countries .
Exports to Canada from India: Challenges and Recommendations
Despite the positive trends and opportunities in the bilateral trade between India and Canada, there are also some challenges and barriers that need to be addressed to enhance the export potential from India to Canada. Some of these are:
- The high tariff rates imposed by Canada on some of the Indian products such as textiles and clothing, fish and seafood, agricultural products, etc. These tariffs reduce the competitiveness and profitability of Indian exporters in the Canadian market .
- The non-tariff barriers such as sanitary and phytosanitary measures, technical barriers to trade, intellectual property rights issues, regulatory differences, etc. that create difficulties for Indian exporters to comply with the Canadian standards and norms .
- The lack of awareness and information among Indian exporters about the Canadian market opportunities, consumer preferences, distribution channels, business culture, etc. This hampers their ability to identify and access the potential buyers and partners in Canada .
- The logistical challenges such as high transportation costs, long transit times, inadequate infrastructure facilities, etc. that affect the timely delivery and quality of Indian products in Canada .
To overcome these challenges and barriers, some of the recommendations for Indian exporters are:
- To take advantage of the preferential market access that will be provided by the CEPA once it is finalized and implemented. This will reduce or eliminate the tariff and non-tariff barriers for Indian products in Canada .
- To diversify their product portfolio and target niche segments in the Canadian market that have high demand and low competition. This will help them to differentiate their products and increase their market share .
- To enhance their product quality and standards to meet the Canadian requirements and expectations. This will help them to gain trust and credibility among the Canadian buyers and consumers .
- To leverage the existing trade promotion platforms such as trade fairs, exhibitions, business delegations, etc. that are organized by the Indian government or industry associations. These platforms will help them to showcase their products and services, network with potential buyers and partners, and explore new market opportunities in Canada .
- To utilize the digital platforms such as e-commerce websites, social media platforms, online directories, etc. that can help them to reach out to a wider audience and increase their visibility in the Canadian market .
References:
https://web.archive.org/web/20100912120201/http://www.investinontario.com/siteselector/coca_401.asp
http://stats.oecd.org/Index.aspx?DataSetCode=TRADEINDMACRO
https://tradingeconomics.com/india/exports/canada
https://www.shiprocket.in/blog/export-to-canada-from-india/
https://connect2india.com/global/export-from-india-to-canada
https://tradingeconomics.com/india/exports/canada
https://www.ibef.org/indian-exports/india-canada-trade
https://oec.world/en/profile/bilateral-country/can/partner/ind
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