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Confederation of Indian Industry
INDIA AND CANADABuilding a Broad Collaborative Framework
INDIA and CANADA: Building a Broad Collaborative Framework
2
TABLE OF CONTENTS
Executive Summary 3
Economic Profile: Canada 4
Key Economic Indicators 4
Composition of the Economy 4
Trade Dependence 5
Competitive Advantage 6
Economic Profile: India 7
Composition of the Economy 7
Competitive Advantage 8
Bilateral Trade 9
Trade: Current Scenario 9
India’s Top 10 Exports to Canada 10
India’s Top 10 Imports from Canada 11
Challenges in Bilateral Trade 12
Trade in Services 14
Bilateral Investments 15
Investments: Current Scenario 15
FDI Inflows from Canada to India 16
FDI Outflows from India to Canada 16
Challenges in Bilateral Investments 16
Bilateral Initiatives 18
CII & Canada:
Deepening and Widening the Bilateral Framework
20
MOU Partners 21
Possibilities of Collaboration 22
CII Vision 25
3
EXECUTIVE SUMMARY
India and Canada have had longstanding bilateral relations, dating back to the early years of India’s
independence. Despite the inherent differences between the two countries with Canada being a
NATO member and India pursuing a non – alignment policy, Canada began extending economic aid
to India through the Canadian International Development Agency (CIDA). India was once the largest
recipient of foreign aid from Canada. Bilateral relations, however, deteriorated following India’s
Smiling Buddha nuclear tests in 1974 and came to an abrupt halt after Pokhran- II, India’s peaceful
nuclear tests in 1998. Following the liberalization reforms in the Indian economy during the 1990’s,
the two countries came closer. The bilateral relationship today is based on strong trade links rather
than assistance. In their wide collaborative canvas, both countries are not only exploring the
possibility of Comprehensive Economic Partnership Agreement (CEPA) and eventually a Free Trade
Agreement (FTA) but looking forward to civil nuclear cooperation as well.
Bilateral trade and investment, though on the rise, remains far from potential. In recent years,
governments on both sides have tried to deepen their commitments of engagement, building on the
shared values of democracy, diversity and people- to- people links. Both sides have taken active
steps to enhance bilateral trade and investment, and facilitate the movement of people. The
Confederation of Indian Industry (CII) and Canadian Council of Chief Executives (CCCE) have played
an instrumental role in building this platform of exchange. The recent past has seen increasing
official interactions, private sector interest and involvement and institutional dialogues.
Today, India is recognized as one of the three priority markets for Canada and the CII - Indo-Canada
Chamber of Commerce (ICCC) Round Table on “Canada-India Trade and Economic Exchanges” in
January 2009 brought to focus the priority sectors as: agriculture, services, communication
technologies, electrical and power equipment, aerospace and civil aviation and tourism. The
Canadian government also launched public consultations with India on the CEPA at this interactive
platform.
Tremendous possibilities of collaboration lie between India and Canada- who are both success
stories in their own might. The complementary structure of both the economies presents a unique
set of factors that can be leveraged for mutual benefit. For instance, Canada’s labor shortages can be
complemented by India’s large, educated and skilled workforce. India’s dire need for infrastructure
translates into numerous business opportunities for Canadian firms who have had experience and
expertise in completing major infrastructural projects. Collaborations in sectors such as agriculture,
automotive, biotechnology, defense technology, clean energy, environment and climate change,
information technology and IT enabled services, media and entertainment, as well as developmental
projects in underdeveloped countries offer vast opportunities to build a broad- based collaborative
framework.
4
ECONOMIC PROFILE: CANADA
Canada is the 11th largest economy in the world. Although its world ranking in terms of GDP has
dropped over the past few years, as a rich, diverse and hi tech economy with a low population,
Canada’s people enjoy an affluent standard of living. Its GDP per capita remains among the highest
in the world, and crossed USD 40,000 in 2008. Economic crisis has a significant impact on the
Canadian economy and GDP shrank by 2.4% from USD 1.31 trillion to USD 1.28 trillion.
Internationally renowned business magazine Forbes has recently pointed out that Canada has largely
avoided the problems that have caused the economic downturn in the United States, such as public
debt, a housing crisis, a banking system in turmoil and a weakening of the US Dollar.
Key Economic Indicators1
Composition of the Economy
In the aftermath of World War II, the rural economy of Canada, then based primarily on agriculture
started heading towards industry and mining. Endowment of natural resources such as petroleum
and natural gas has made Canada one the few developed nations, which is a net exporter of energy.
Canada entered into the North American Free Trade Agreement (NAFTA) in 1994, which led to a
dramatic increase in its exports.
The Canadian economy is now a knowledge- driven and services- based economy. Today, services
constitute the largest component of its economic structure, almost touching 70% and agriculture has
shrunk to 2%.
Given below is the composition of the Canadian Economy:
1 Central Intelligence Agency- World Factbook www.cia.gov
INDICATOR 2008 2009 est
Population 33.2 Million 33.4 million
Population Growth 0.83% 0.82%
Unemployment 6.2% 8.5%
GDP (Purchasing power parity) USD 1.319 trillion USD 1.287 trillion
GDP- per capita (PPP) USD 39,700 USD 38,400
Inflation 2.4% 0.2%
Exchange Rate (CAD: USD) 1.03 1.15
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COMPOSITION OF ECONOMY BY SECTOR:
CANADA (2008 est)
Agriculture
2.00%
Industry
28.40%
Services
69.60%
Agriculture
Industry
Services
Composition of Canada’s GDP by Sector (2008 est) 1
Trade Dependence2
The Canadian economy is a trade dependent economy and its economic well- being largely rests on
international economic linkages. An estimated one in five jobs in Canada depends on international
trade. In 2009, volume of exports at USD 315 billion generated an overall trade deficit of USD 4
billion over imports of USD 320 billion. This has been for the first time in this decade that a trade
deficit has been registered, which earlier used to be in the range of USD 30 billion to USD 45 billion.
An overview of major trading partners is given below:
Leading Export Markets for Canada
2005 2006 2007 2008 2009
U.S.A. 83.82% 81.55% 78.95% 77.65% 74.99%
U.K. 1.89% 2.30% 2.84% 2.69% 3.37%
China 1.65% 1.77% 2.11% 2.17% 3.11%
Japan 2.10% 2.14% 2.05% 2.29% 2.31%
Mexico 0.77% 0.99% 1.10% 1.21% 1.34%
Germany 0.74% 0.90% 0.86% 0.93% 1.04%
South Korea 0.65% 0.75% 0.67% 0.79% 0.98%
Netherlands 0.50% 0.70% 0.90% 0.77% 0.77%
France 0.58% 0.65% 0.69% 0.67% 0.75%
India 0.25% 0.38% 0.40% 0.50% 0.60%
Leading Suppliers to Canada
2005 2006 2007 2008 2009
U.S.A. 56.49% 54.87% 54.24% 52.37% 51.16%
China 7.75% 8.69% 9.41% 9.82% 10.86%
Mexico 3.83% 4.03% 4.22% 4.13% 4.53%
Japan 3.89% 3.86% 3.80% 3.52% 3.38%
Germany 2.70% 2.81% 2.83% 2.93% 2.92%
U.K. 2.74% 2.74% 2.82% 2.90% 2.58%
South Korea 1.41% 1.45% 1.32% 1.38% 1.62%
France 1.31% 1.30% 1.25% 1.39% 1.54%
Italy 1.21% 1.24% 1.24% 1.18% 1.22%
Algeria 1.10% 1.25% 1.25% 1.77% 1.03%
1 Central Intelligence Agency- World Factbook www.cia.org
2 Statistics Canada
6
Trade analysts point out that diversity of exports in services is not clearly reflected in the overall
trade data. Almost 75% of Canada’s exports are absorbed by the United States and declining
demand caused by the slowdown in the US is adversely impacting the Canadian economy. The
country now needs to diversify its trading partners and avoid over- dependence on any single
economy. Canadian exporters can also find various areas for participation in the growing Indian
market.
Competitive Advantage
Canada’s biggest competitive advantages come from an advanced services sector, an abundance of
natural resources, sound management at the fiscal level and its free trade agreements. The
Economic Intelligence Unit has rated Canada as the best place to do business in the G7 from 2008-
2012. Additionally, Canadian leadership in energy production is remarkable, which also form the
backbone of Canada’s exports. The country is also places great emphasis on cutting edge research to
create innovations in business and technology.
7
ECONOMIC PROFILE: INDIA
India’s growth story began to unfold only after economic liberalization reforms were introduced in
the 1990’s. The reforms did away with excessive regulation and licensing requirements and allowed
automatic approvals in various sectors for foreign direct investments. Today, India ranks just after
Canada at number 12, in terms of GDP (at official exchange rates). However, a massive population
makes the GDP (nominal) per capita abysmally low, barely touching $1017. Indian economy has
been witnessing a phenomenal growth since the last decade. In the five years up to 2007-08, India’s
economic growth averaged close to 9 per cent a year. The advent of the global crisis slowed India’s
momentum in 2008-09, dropping its GDP to 6.7% for the year 2008-09. In 2009-10, despite a fairly
serious agricultural drought and high inflation, overall economic growth is officially expected to
touch 7.2%. This resilience in India’s economic performance despite the global downturn is primarily
on account of robust private composition and a substantial fiscal stimulus.
Composition of the Indian Economy
Agriculture remains the predominant sector in the Indian economy. The industrial and services
sectors have experienced phenomenal growth in the last decade. Although more than half of India’s
labor force is engaged in agriculture, services account for more than half of India's output while
utilizing less than one third of its labor force.
Major sectors leading the bandwagon include textiles, chemicals, food processing, steel,
transportation equipment, cement, mining, petroleum, machinery, software and the bulk of services
fall under IT/ ITES, financial services and budding healthcare and medical tourism facilities.
Given below is the composition of the Indian Economy:
Composition of India’s GDP by Sector (2009) 1
1 International Monetary Fund- World Outlook Database www.imf.org
Composition of India's GDP by Sector (2009)
Agriculture
16%
Industry
26%Services
58%
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Competitive Advantage
Coupled with a young, English- speaking population and an increasing purchasing power, India
serves not only as a large and attractive middle class market but also as a hub of technical expertise
and intellectual capital. Exports for the Information Technology (IT) and Business Process
Outsourcing (BPO) sectors are expected to touch US$ 60 billion–US$ 62 billion in 2010-11, according
to the National Association of Software and Service Companies (NASSCOM).1 India is home to 1500
research institutions and the second largest pool of scientists and engineers in the world and is
rapidly developing into a global knowledge hub. According to World Investment Prospects Survey
2009-2011 released by UNCTAD, India has been ranked at the third place in global foreign direct
investments this year, following the economic meltdown, and will continue to remain among the top
five attractive destinations for international investors during the next two years.
1 India Brand Equity Foundation www.ibef.org
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BILATERAL TRADE
Bilateral trade between India and Canada has increased from USD 1.6 billion in 2004-05 to USD 3.8
billion in 2008- 09 as per the data available with the Ministry of Commerce and Industry,
Government of India. While this has been a healthy increase of 2.5 times over the last 4 years,
Canada’s share in bilateral trade in 2008-09 constitutes barely 0.78% of India’s total trade of USD
489 billion with other countries. Similarly, according to Statistics Canada, in 2009 the share of
Canada- India total trade in Canada’s total trade with the world (USD 634 Billion) is a meager 0.6%.
Although total trade has been increasing, there exists tremendous potential to augment trade ties
between the two countries. Since the last two years, India’s imports from Canada have risen sharply
and the trade balance has shifted in favor of Canada.
The chart below shows the value of India’s Exports to Canada, India’s Imports from Canada, the total
bilateral trade and India’s trade balance from 2004- 05 to 2008- 09:
India- Canada Bilateral Trade (USD Millions)1
Value (USD Millions) 2004- 05 2005- 06 2006- 07 2007- 08 2008-09
India's Exports to Canada 867 1022 1110 1267 1364
India's Imports from Canada 776 920 1776 1981 2459
Total Bilateral Trade 1643 1941 2886 3248 3823
India's Trade Balance 91 102 -666 -715 -1094
1 Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India
www.dipp.nic.in
India-Canada Bilateral Trade
-2000
-1000
0
1000
2000
3000
4000
5000
2004- 05 2005- 06 2006- 07 2007- 08 2008-09
Year
In U
SD
Mil
lio
n
India's Exports
to Canada
India's Imports
from Canada
Total Bilateral
Trade
India's Trade
Balance
10
India’s Top 10 Exports to Canada
Organic Chemicals is India’s largest export to Canada, which registered a growth of 11% despite the
global economic downturn. Similarly, pharmaceutical products are also among the top 10 exports to
Canada, indicating that the flourishing chemicals and pharmaceutical sector might hold
opportunities beyond trade into research and development and possibilities of joint ventures. The
textiles sector has shown negative growth of approximately 15%; however it remains among the
largest Indian exports to Canada.
The table below gives India’s top 10 exports to Canada:
India’s top 10 exports to Canada1
(In US$ million)
Commodity 2007-
2008
2008-
2009 %Growth
Organic chemicals 203.24 225.61 11.01
Articles of apparel and clothing accessories,
knitted or corcheted.
140.09 147.89 5.56
Articles of apparel and clothing accessories,
not knitted or crocheted.
112.01 119.82 6.97
Natural or cultured pearls, precious or semi-
precious stones, pre.metals,clad with
pre.metal and articles;imit.jewelry; coins
60.79 92.72 52.53
Articles of iron or steel 79.07 90.98 15.06
Nuclear reactors, boilers, machinery and
mechanical appliances; parts thereof.
65.15 59.26 -9.04
Other made up textile articles; sets; worn
clothing and worn textile articles; rags
60.61 51.7 -14.69
Electrical machinery, equipment and parts,
television image and sound recorders,
reproducers and parts.
32.15 40.73 26.69
Pharmaceutical products 30.68 34.47 12.34
Fish and crustaceans, molluscs and other
aquatic invertabrates.
40.66 32.96 -18.95
1 Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India
www.dipp.nic.in
11
India’s Top 10 Imports from Canada
India’s imports from Canada rose by 24% to USD 2.5 billion in 2008-09 primarily due to increased
agricultural and fertilizer imports. This fact points towards the inefficiencies in the Indian agricultural
system and the need to usher in a second Green Revolution. Import of aircraft and spacecraft and
their parts has dramatically increased under the influence of a liberalized bilateral air transport
agreement. Electrical machinery Nuclear reactors and boilers are amongst the top 10 imports and
are still showing positive growth. Nuclear machinery features in the top bilateral imports as well as
exports. Imports in the category of plastic and its articles has also shown a growth of 80% over the
last year, although its total value is not very high.
Given below is a listing of India’s top 10 imports from Canada:
India’s top 10 imports from Canada1
(In US$ million)
Commodity 2007-
2008
2008-
2009 %Growth
Fertilisers 207.82 606.78 191.97
Edible vegetables and certain roots and
tubers.
623.42 448.48 -28.06
Aircraft, spacecraft, and parts thereof. 97.59 384.26 293.73
Nuclear reactors, boilers, machinery and
mechanical appliances; parts thereof.
124.65 153.05 22.78
Paper and paperboard; articles of paper
pulp, of paper or of paperboard.
107.5 149.08 38.68
Pulp of wood or of other fibrous cellulosic
material; waste and scrap of paper or
paperboard.
83.13 101.83 22.5
Natural or cultural pearls, precious or
semiprecious stones
18.11 99.09 447.28
Electrical machinery, equipment and parts;
television image and sound recorders,
reproducers and parts.
136.5 96.68 -29.17
Plastic and articles thereof 25.98 46.81 80.18
Optical, photographic cinematographic
measuring, checking precision, medical or
surgical instruments, and apparatus parts
and accessories thereof.
46.76 44.2 -5.47
1 Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India
www.dipp.nic.in
12
Challenges to Bilateral Trade
In spite of a growing trade relationship between India and Canada, there are numerous challenges
ranging from tariff liberalization and technical/ non technical barriers in trade to procedural
transparency and dispute settlement that remain to be overcome.
Given below are a few prominent issues of trade in Canada1:
Tariff Peaks
and Quotas
Govt. of Canada maintains high tariff peaks for certain products like
vegetables (Asparagus 19%), flowers (Orchids 16 %, Roses 10.5 %), tobacco
cigarettes (12.5%), natural gas (12.5%), textiles (14%), clothing (18%), some
leather products (gloves 15.5%), some footwear (18%), watercrafts (20 or
25%) etc. Tariff quotas are imposed on some agricultural products, like
dairy products, poultry, meat, eggs and wheat and barley products. Tariff
rate over access commitment on imported milk is 243%; on other dairy
foods for smearing is as high as 313.5%; on meat and poultry (fresh, chilled
or frozen) as high as 154.5% and 238%.
Tariff Escalation Tariff escalation is quite prominent in processed food, beverages, tobacco,
textiles and leather products.
Tariff Rate Import Duty
Coco beans: 0% Coco powder: 6%
Natural mineral water: 0% Flavored mineral water: 11%
Unprocessed tobacco: 0% Rolled cigars/ cigarettes: 4- 12.5%
Wool/ Animal hair: 0% Yarn/ Carded or combed animal hair:
8%; Woven fabrics: 12- 14%
Raw hides: 0- 3% Leather articles: 7- 15%
Technical Barriers to
Trade (TBT)
In 2005, Canada made 48 TBT notifications to WTO, mainly concerning
radio communications equipment, emission standard of passenger cars and
engines, safety measures for motor vehicles, grading of eggs and inspection
requirements for packaging. Canada has stringent and numerous safety
regulations, food packaging and marketing requirements, which companies
must consider in detail.
Sanitary/
Phytosanitary
Measures (SPS)
In 2005, Canada made 64 SPS notifications to the WTO, mainly concerning
the amendments to the Food and Drugs Act, the Pest Control Products Act,
sanitary requirements for imported bean products and wood products.
1 India Canada Economic Relationship, CII Paper November 07 based on Canada Trade Policy Review 2007, WTO
13
Given below are some major issues of trade in India:
Import Tariffs1 In 2009, Govt. of India reduced tariffs on Canola oil keeping in view
Canada’s market access request. In 2007, tariffs were reduced on many non
– agricultural goods from 12.5% to 10%. However, despite these efforts,
Indian tariff levels, on average are much higher in India. Tariffs remain very
high on products like petrochemicals, automobiles, and finished steel
items.
Import Licensing2 In spite of liberalizing restrictions, there are still many products where
obtaining import license is mandatory. These licenses can be granted to
foreign nationals who are either permanently residing in India or working in
India for foreign firms that hold greater than 30% equity or working at
embassies in India. India also maintains a (1) banned or prohibited list, (2)
restricted list that require a non- automatic import license and (3) canalized
list which can be importable by government trading monopolies subject to
cabinet approval.
Customs
Documentation3
Indian customs require extensive documentation which inhibits free flow of
trade and lead to frequent processing delays.
Procedural Clarity4 Not a single official document containing complete tariff information is
available for Canadian exporters who must consult at various places to
arrive at the rates applicable on their goods.
Infrastructure5
There are infrastructural shortcomings, including problems in product
logistics in terms of distribution and transportation.
Tax System6 A complex and highly interpretive tax system, lack of transparency across
government processes and additional taxes levied by different state
governments cause further problems.
1 India Canada Economic Relationship, CII Paper November 07 based on Canada Trade Policy Review 2007, WTO
2 India Canada Economic Relationship, CII Paper November 07 based on Canada Trade Policy Review 2007, WTO
3 India Canada Economic Relationship, CII Paper, November 07
4 India Canada Economic Relationship, CII Paper, November 07
5 CII-CCCE Joint Statement of the first India- Canada CEO Roundtable, March 07
6 CII-CCCE Joint Statement of the first India- Canada CEO Roundtable, March 07
14
Trade in Services
The Canadian services sector represents over two-thirds of Canada’s GDP and also generates 3 out
of 4 new employment opportunities. One of the principal drivers of India’s economic growth has also
been its services sector. Since both India and Canada have commercial strengths in the services
sector, the key to achieving a mutually- beneficial economic relationship is to harness each others’
complementary strengths.
India is transitioning towards a knowledge based economy. Canadian companies could benefit from
Indian expertise in the field of information technology and biotechnology, particularly
pharmaceuticals. India’s growth provides business opportunities in providing services to the
burgeoning market. The growing middle class generates demand for services in sectors like
education, telecommunications and transportation. India provides a plethora of opportunities for
Canadian companies as subcontractors to the large infrastructure development projects currently
being proposed or underway in India.
On the other hand, Canada is far ahead in energy services and environment management. As energy
concerns mount up in India and the quality of environment deteriorates, India could learn from
Canadian expertise in the field and implement systems that promote energy efficiency and focus on
harnessing renewable resources. Emerging opportunities in nuclear technology can also witness
significant inputs from Canada. Canada is also particularly renowned for its emphasis on and
encouragement of cutting edge research and technology, which presents massive opportunities of
collaboration for Indian companies.
Bilateral efforts need to be directed towards opening up services markets to enable both countries
to derive mutual benefits, enhance their global competitiveness and integrate into the global supply
chain.
15
BILATERAL INVESTMENTS
Investment: Current Scenario
Foreign investments have been a critical component of India’s continued economic and social
growth since the last two decades. However, as is the case in bilateral trade, the bilateral investment
scenario remains far below potential.
Investments from Canada to India dipped to from CAD 806 million in 2006 to CAD 644 million in
2007 before picking up again in 2008. But the share of each country’s investments in the other’s
total FDI remains miniscule. A push towards encouraging investments can help both countries to
widen and deepen the collaborative framework.
Given below are the Foreign Direct Investment data of Indian investments in Canada, Canadian
investments in India and their share in the other country’s total FDI amount from 2005 – 2008:
India- Canada Foreign Direct Investments 2005 – 2008 (CAD Millions)1
FDI (CAD Millions) 2005 2006 2007 2008 % Share in
2008
Indian Investments in Canada 171 211 430 1022 0.2%
Canadian Investments in India 319 806 644 801 0.1%
1 Department of Foreign Affairs and International Trade Canada
India- Canada Bilateral Investments 2005- 2008
1022
171 211
430
801
644
806
319
0
200
400
600
800
1000
1200
2005 2006 2007 2008
Year
FD
I (C
AD
Millio
ns
)
Indian
Investments
in Canada
Canadian
Investments
in India
16
FDI Inflows from Canada to India
Canada has a relatively low presence in India, which both countries need to work on strengthening.
According to Ministry of Commerce and Industry in India, the cumulative FDI inflows from April 2000
to December 2008 from Canada account for only about 0.31% of India’s total FDI Inflows. As Canada
grapples with the ripple effects of the global economic slowdown, investments may further descend
in the future. However, with the right mix of policies and incentives, both the governments can
create an environment, which is more conducive to attracting greater investments. The estimation
that the Indian economy will be growing between 6-7% even during tough financial times, makes
India a preferred investment destination.
The success of the select Canadian companies operating in India can be gauged by the popularity of
the Blackberry mobile phones in the Indian market. It is a product of Research In Motion (RIM), a
leading designer, manufacturer and marketer of innovative wireless solutions based in Ontario,
Canada. But the surface has merely been scratched. Leading Canadian companies like Nortel,
Scotiabank Bombardier, have established their presence in the Indian market. Apart from these
global players, small and medium enterprises, which comprise up to 86% of the service providers in
Canada, can also find opportunities in the growing Indian market. India is witnessing growth across
various sectors like finance, energy, environment, infrastructure, telecommunication, transportation
and information technology, which are among Canada’s core strengths.1
FDI Outflows from India to Canada
Indian corporate presence in Canada is growing. Indian government’s recent easing of restrictions on
outward investment provides greater opportunities for increased FDI through small and medium
enterprises into Canada. The most striking development has been the growth in Indian investments
in Canada’s Information and Communications Technology (ICT) sector by the Indian IT czars including
Tata Consultancy Services, Wipro and Infosys.
Apart from IT/ software development centers, Indian investments also include sectors like life
sciences, pharmaceuticals, minerals and metals, petro chemicals, automotive and auto ancillaries, oil
and gas, and financial services. State Bank of India and ICICI Bank have multiple branches in Canada.
The Aditya Birla Group has generated over 3500 employment opportunities in Canada2.
Large corporate companies currently dominate Indian investments in Canada. There is a lot of scope
for SMEs to enter and explore opportunities spread across a multitude of sectors.
Challenges to Bilateral Investments
The presence of English as the business language, a democratic government with a Parliamentary
system and an independent judiciary in both nations, create an environment of familiarity. Although
this familiarity fosters a business and investment friendly climate, numerous challenges and
restrictions to investment still exist on both sides of the table. While the conclusion of negotiations
1 Canada and India: Trade and Investment Opportunities in the Services Sector, Canadian Services Coalition, March 07
2 “Canadian cos asked to invest in India for profitable business” The Wall Street Journal, Live Mint www.livemint.com
17
towards the Foreign Investment Protection and Promotion Agreement was a major step in
facilitating bilateral investments, many challenges are yet to be overcome:
A few issues faced by Indian and Canadian companies while investing in each other’s countries are as
given below:
Visa Issues1 Indian companies find it difficult to obtain business visas for Canada. The
current visa application system inhibits business.
GST registration and
de-registering2
The process for a foreign company to change its legal status in Canada is
cumbersome and somewhat open to interpretation. A review would help to
make the system more business friendly.
Unions and Threat
of Unionization3
This is a major impediment for businesses in Canada to operate freely and
with optimum efficiency. Attempts to implement Performance- based
compensation in companies have seen significant opposition from Unions.
Bureaucracy4 While transparency in bureaucratic matters is a concern in both countries,
the procedure needs to be formalized and simplified especially in India.
SME and PPP5 Small and medium sized enterprise in India needs to be engaged to a
greater degree. Public Private Partnership model should be adopted as
normal practice.
Mutual Recognition
of Qualifications6
Both countries need to make some progress in recognizing each other’s
professional qualifications in easing labor mobility.
Privacy and Data
protection7
Bilateral recognition of data protection and privacy legislation in India and
Canada and clarity of interpretation is an issue that needs to be resolved.
Customs8 Customs procedures are complex and not transparent in both countries.
There is a need for cooperation in areas of discretionary valuation and
extensive documentation.
Totalization
Agreement9
An agreement is needed to ensure that social security contributions are
made either in one country or as part of a refund-on-return system.
1 India Canada Economic Relationship, CII Paper, November 07
2 CII-CCCE Report to Ministers of India- Canada CEO Roundtable, September 08
4 CII-CCCE Report to Ministers of India- Canada CEO Roundtable, September 08
5 India Canada Economic Relationship, CII Paper, November 07
5 India- Canada Bilateral Meeting, January 09
6 India- Canada Bilateral Meeting, January 09
7 CII-CCCE Report to Ministers of India- Canada CEO Roundtable, September 08
8 India Canada Economic Relationship, CII Paper, November 07
9 India- Canada Bilateral Meeting, January 09
18
BILATERAL INITIATIVES
The declaration of “Partnership for 21st
century” in 2003 by both governments under the leadership
of Indian Prime Minister Vajpayee and Canadian Prime Minister Chretien was a major step in
engaging both countries in institutionalized dialogues. Since then, numerous initiatives have paved
the way towards greater collaboration across a wider spectrum.
• India-Canada Memorandum of Understanding on Energy Cooperation was signed during
the November 2009 visit to India by Prime Minister Harper. The MoU will enable
cooperation in the areas of renewable energy and energy efficiency, oil and natural gas,
power generation, transmission, distribution and end-use, energy research and
development.
• Prime Ministers Harper and Singh announced the conclusion of negotiations
on a Nuclear Cooperation Agreement between India and Canada in November 2009 at the
Commonwealth Heads of Government Meeting in Trinidad and Tobago
� India-Canada Comprehensive Economic Partnership Agreement (CEPA): In March 2009,
Canada’s Minister for International Trade and Asia- Pacific Gateway Mr Stockwell Day
announced the launch of public consultations on a possible India-Canada Comprehensive
Economic Partnership Agreement (CEPA). The consultation process is aimed at obtaining
advice and views on priorities, objectives and concerns from businesses, Canadian citizens,
and provincial governments, among others, to help frame the parameters of the CEPA.
� India- Canada Foreign Investment Protection and Promotion Agreement (FIPA): In June
2007, the Minister of International Trade for Canada, David Emerson, along with his
counterpart in India, Minister of Commerce and Industry Mr Kamal Nath, announced
negotiations for the forthcoming Canada-India Foreign Investment Protection and
Promotion Agreement. The initiative offers investment protection, including non-
discriminatory treatment; protection in relation to expropriation; limited allowances for the
regulation of health, safety or environmental laws; and access to international arbitration in
dispute settlement. FIPA is currently under the consideration of Government of India and in
the final stages of approval.
� Free Trade Agreement (FTA): The FIPA is expected to be the first step towards an FTA. CII
and CCCE set up a task force to study the feasibility of an FTA between India and Canada and
submitted a report to the respective government officials. Still in the exploratory stage, the
FTA proposal has found support in Trade Policy negotiations.
� MOU on Agriculture Cooperation: India and Canada signed a Memorandum of
Understanding (MoU) in January 2009 to further cooperation between the two countries in
the field of agriculture and allied sectors. The agreement was signed by Minister for
Agriculture, Mr Sharad Pawar and Canadian Minister of Agriculture and Agri-Food Mr Gerry
Ritz, led a high level delegation to India.
19
� Working Group on Agriculture on Sanitary and Phytosanitary Measures (SPS): The Trade
Policy Consultations between India and Canada have led to the creation of a Working Group
on Agriculture on Sanitary and Phytosanitary Measures (SPS) issues. India’s Minister for
Commerce and Industry has assured that issues concerning the import of Canadian pulses
into India and veterinary issues will be speedily resolved through this platform. A working
group has also been set up focusing on the import of Canadian pulses and the procedure for
fumigation of Canadian pulses at Indian ports on arrival.
� Canada - India Environmental Institutional Strengthening Project 2006: In December 2005
Canada and India signed a Climate Change Memorandum of Understanding (MOU) to
facilitate and enhance bilateral cooperation in carbon market and technology transfer
between the private sector entities, leading to reduction in global emissions of green house
gas emissions. Under this MOU, the Environmental Institutional Strengthening Project built
long-term collaboration between Environment Canada and the Indian Ministry of
Environment and Forests to strengthen India's institutional capacity to tackle pressing
environmental issues, such as air quality, hazardous waste and toxic substances.
Environment Canada provided overall management and technical assistance to the project.
An India- Canada Environment Forum has also been set up and its first meeting is proposed
to take place in June 2009.
� India - Canada Science & Technology Cooperation: India and Canada signed a bilateral
science and technology agreement in November 2005 to encourage, develop and facilitate
cooperative activities between the two countries. Focus areas include Alternate Energy and
Sustainable Environmental Technologies; Biotechnology, biopharmaceuticals, Health
Research & Medical Devices; Earth Sciences and Disaster Management; Information and
Communication Technologies; Nano science/ Nanotechnology; Aerospace engineering;
Photonics and synchrotron science. At least 10 projects under this agreement have been
finalized and financing arrangements are underway. Discussions are ongoing for the
establishment of a joint center on nanotechnology as well.
� India - Canada Joint Working Group on Counter Terrorism: Set up in 1997, the group has
evolved its agenda over the years to strengthen the India-Canada collaboration on counter-
terrorism. It seeks to leverage ongoing efforts in both countries to better deal with various
aspects of terrorism by strengthening capacity and policy framework. The two sides engage
in training programs to deal with issues like terrorist finances, forensic science,
transportation security and immigration control systems. It is crucial to renew and build on
this partnership in the joint commitment to fight terror.
20
CII & CANADA: Deepening and Widening the Bilateral Framework
� CII led a high powered CEOs Mission to Canada, comprising of India’s top companies
engaged heavily in infrastructure from 23 – 26 March accompanying Minister Kamal Nath,
Minister of Road Transport and Highways on his visit to Toronto, Ottawa and Montreal had
urged Canadian companies to participate in India’s growth story, particularly in the
enormous, upcoming opportunities in the infrastructure sector. To address the massive
infrastructure deficit in India, Minister Kamal Nath has jumpstarted the country to embark
on the largest road building program in the world. Investments are needed to the tune of
$80 billion over the next 6-8 years. In this context and Canadian expertise in developing
infrastructure projects, the delegates participated in extensive programs and meetings in
Canada.
� CII had the honour to be associated with the visit of the Ontario Premier Dalton McGuinty to
New Delhi, Mumbai and Hyderabad from 6 – 11 December 2009. Minister for Economic
Development & Trade, Ontario, Ms Sandra Pupatello accompanied the delegation, which
comprised of 26 leading Canadian organizations. The delegation met with Indian business
leaders and investor, highlighting Ontario’s expertise in environmental technology and
infrastructure. The Premier discussed how Ontario can help India fulfill its goal of building a
greener economy. He highlighted India’s growing role in the world markets. Collaborative
initiatives between Indian and Canadian companies can generate solutions for India’s energy
and water supply challenges.
� CII had the privilege to be part of the meetings organized by Canadian High Commission
during Prime Minister Stephen Harper’s visit to India in November. A roundtable on
Infrastructure was organized with key business leaders from India.
� In January 2009, the Canadian Minister of International Trade and Minister for the Asia -
Pacific Gateway, Mr Stockwell Day, at the CII Partnership Summit in New Delhi, said that his
government was willing to take all possible steps to boost bilateral ties with India. Mr Day
also announced the launch of public consultations on a possible India-Canada
Comprehensive Economic Partnership Agreement (CEPA).
� CII interacted with the Canadian Minister of Agriculture and Agri-Food and Minister for the
Canadian Wheat Board, Mr Reginald Ritz in January 2009. CII also facilitated a bilateral
meeting between Mr Ritz and Mr Kamal Nath, Indian Minister of Commerce and Industry.
Mr Nath emphasized the need for furthering the cause of multilateral trading regime based
on fair and transparent rules and concluding the Doha Round, which would help in tackling
problems like poverty and unemployment through expansive trade opportunities.
� CIDA, CANMET Materials Technology Laboratory (CANMET-MTL) and CII are also currently
working on a High Volume Ash Fly Ash Concrete (HVFAC) project. The technology transfer
project funded by the Canada Climate Change Development Fund through CIDA aims to help
India in reducing greenhouse gas emissions by adopting HVFAC technology. CIDA has also
been working with CII in capacity building of CII’s Environment Management Division. The
21
collaboration includes strengthening capacity in developing environmental standards and
quality management along with working towards sustainable development.
� CII & the Canadian Council of Chief Executives organized the first CEOs Roundtable in March
2007 in New Delhi and the second Roundtable in June 2007 in Canada. The CEOs Roundtable
was chaired on the Indian side by Mr Tarun Das, Chief Mentor, CII and on the Canadian side
by Mr Thomas d’Aquino, Chief Executive and President, CCCE. CEOs on both the sides
identified barriers to trade and resolved to enhance free trade between the two countries.
They also explored the feasibility of a Free Trade Agreement between the two countries. In
September 2008, CII and CCCE presented their comprehensive framework of
recommendations to Mr Kamal Nath, Indian Minister of Commerce and Industry and Mr
David Emerson, Canada’s Minister of International Trade, respectively.
CII MOU Partners in Canada
1. Canadian Council of Chief Executives (CCCE)
2. Canada India Business Council (CIBC)
3. Canadian Manufacturers Association (CMA) – Joint Committee for Industrial Collaboration
and Joint Committee for Technology and Production Sharing
4. Canadian Manufacturers and Exporters (CME)
5. Export Development Canada (EDC)
6. Greater Toronto Marketing Alliance (GTMA)
7. Indo Canada Chamber of Commerce (ICCC)
8. Ontario Chamber of Commerce (OCC)
9. Province of Manitoba
10. Quebec Manufacturers & Exporters (QME)
22
POSSIBILITIES OF COLLABORATION
Extensive opportunities are available in India for joint ventures/ investments by Canadian
companies. Apart from the 6 priority sectors- agriculture, services, communication technologies,
electrical and power equipment, aerospace and civil aviation and tourism- identified by the CII- ICCC
Round Table on “Canada-India Trade and Economic Exchanges” in January 2009, sectors as varied as
infrastructure, automobile, petroleum, mining, entertainment, energy and environment can also be
explored.
� Agriculture and Food Processing: India is among the top producers of vegetables and fruits
in the world. However, India requires Canadian expertise in the food processing sector, both
in terms of financial participation as well as technology. Only 4% of agricultural produce is
processed in India. Not only will investing in food processing add value but also save huge
amount of products from wastage by increasing their shelf life.
� Aerospace: Aerospace is designated as a priority sector by the governments of both the
countries. Collaboration in this field can lead to innovation and efficiency across a multitude
of commercial, industrial and military applications.
� Automotive: Indian capabilities in the automotive manufacturing and parts sector have been
widely acknowledged and India is fast emerging as a major auto-parts global hub. Joint
efforts in automotive R&D and manufacturing will be beneficial to both economies.
� Biotechnology: Under the India- Canada Science & Technology Cooperation initiative, both
the governments are encouraging joint R&D projects in convergent medical technologies,
clean technologies and in the bio-pharma and health sphere. Pharmaceutical companies of
the two countries can also gain by collaborating with each other for large scale production of
existing compounds at reasonable cost.
� Civil Nuclear Cooperation: Canada and India are negotiating a comprehensive nuclear deal
that will allow both the countries to participate in each other’s civil nuclear power sector.
According to Lisa Monette, a spokesperson at Canada’s Foreign Office, the negotiations have
come after Canada backed a decision by the NSG to provide an exemption for India that
would allow it to develop civilian nuclear power even as it maintains its right to develop
weapons without international scrutiny.
� Development Projects: India and Canada can join hands by pooling their expertise,
technology and labor to undertake business ventures in lesser developed countries,
particularly in Africa, South East Asia and the Middle East. The dire need for infrastructure
services in civil construction, machine tools, power generation, telecommunication and IT
could be converted into successful joint venture opportunities.
� Education: Recognizing students as a country’s best ambassadors, both governments can
work together to promote higher education and increase inter-cultural links. Recently,
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Canada has also tried to encourage students to apply to Canadian Universities by easing the
application process, extending work permits etc.
� Energy and Environment: Canada is ranked fifth in the world in total energy production,
seventh in oil production, third in natural gas production and first in hydroelectric
generation. Canada is also the world leader in nuclear energy. India’s growing demand for
energy services and India's quest for energy independence offers huge business
opportunities for Canadian companies. Canada and India have moved to establish a
mechanism for sustained bilateral technical cooperation in the oil and gas sector over the
next several years, particularly in nuclear and renewable energy sectors. Cooperation
between the two countries in the field could give a major boost to India's development. An
MOU in Energy between the Ministry of Power and the Department of Natural Resources of
Canada is currently under consideration.
o As India and Canada work towards greater energy cooperation, Canadian expertise
could particularly render benefits in aspects of environment management, such as
water and wastewater treatment, waste management, clean energy and energy
efficiency.
� Entertainment and Media: The Indian animation industry is currently estimated to be at
USD 12- 15 billion. There is a huge demand for trained professionals in the field of animation
and industry was not getting enough manpower. Canadian animation companies like
Vogelesang are interested in outsourcing total production with some quality guidelines to
India.
� Infrastructure: Canadian firms have tremendous expertise in providing infrastructural
services, as is evident by their role and international exposure in completing major
infrastructure projects in Europe and Mexico. They can play an important role for India in
filling up infrastructural bottlenecks. India needs 480 billion dollars investment in
infrastructure in the next five years. Participants in the CEO Roundtable and government
officials from both sides have also expressed interest and support for increase in FDI
targeted towards India’s infrastructure, especially in transportation, power and
telecommunication sectors.
� Mining: India's mining sector currently accounts for 2.6 percent of the country's GDP and it
is set for a big growth. There is almost 30% shortage in fuel supply in India and the sector
has been heavily regulated by the Government. Canada is far ahead in fuels and metal
mining. Canadian companies can invest in India and help bring in a lot of training, technology
and skills. An MOU on Mining and Potash has been proposed.
� R&D: Canada invests proportionately more on primary scientific research than all other G7
countries. India is home to over 1500 research institutions and has the second largest pool
of scientists and engineers in the world. Joint research, with innovative solutions, can help
overcome many challenges in agriculture, science & technology, healthcare and energy.
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� Skilled Labor: According to the Ministry of Finance in Canada, there are shortages of skilled
labor in a number of provinces and territories. These shortages are particularly acute in
Alberta and Saskatchewan, where more than one-quarter of manufacturers report that labor
scarcity is limiting operations. Projections by the United Nations show that over the next 25
years, Canada will experience the second largest decline among G7 countries and the fourth
largest among all OECD countries. An aging population will add to the shortages of labor that
can already be felt in the Canadian economy, putting downward pressure on living standards
and creating additional demand for health and social services. Relaxing rules for free
movement of skilled labor from India can create opportunities for Indians and help assuage
critical labor shortages.
� Tourism: According to Statistics 2007, only 150, 000 tourists from Canada visited India.
There are not many tourists from India to Canada either. India could benefit from a massive
“Incredible India” campaign in Canada. However, the Ministry of tourism in India needs to
take significant steps to improve the tourism related infrastructures in India such as airports,
hotels, amenities, monuments etc.
o Medical tourism as a segment is also developing. Hospitals and supplying groups are
gearing up, but there is a shortage of hotels and insurance services. There is low cost
health care, but the trade itself has not been enabled. It is important to have a
vibrant involvement in medical tourism to India and Canada.
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CII VISION
CII envisions building a broad India – Canada collaborative partnership framework, based on deeper
economic and commercial exchanges. A commitment to tariff liberalization and greater transparency
in the regulatory framework is of paramount importance in realizing this vision.
An overview of the existing bilateral relationship indicates that the potential has merely been
exploited, be it in trade, bilateral investments or sector specific cooperation. With the two countries
at the verge of launching a civil nuclear agreement, Comprehensive Economic Partnership
Agreement (CEPA) and eventually a Free Trade Agreement (FTA), bilateral trade may see an
exponential rise in the coming years. The two countries should aim at trebling the bilateral value in
the next 2- 3 years. Countries must relentlessly pursue and make sustainable efforts to build a multi-
dimensional collaborative framework that leads towards a broader economic engagement,
translating into a win- win partnership.
At the global level, India and Canada have submitted offers to engage in further services
liberalization in the WTO Doha Round. While bilateral efforts must be maintained to open up the
services market in India, limitations and sensitivities to services investment in key sectors- such as
retail, banking and insurance- must be given due consideration.
The CII and CCCE led a commendable effort of bringing together industry leaders on both sides to
script the roadmap for bilateral framework. The reports of the Round Table, duly submitted to both
the governments could serve as a strong foundation for building future bridges between the two
countries. The Round Table must continue its dialogue in the future. It could serve as a useful
platform to help the two governments in successfully launching several bilateral initiatives.
Lastly, Canada is home to about a million Indians, which make up 3.1% of Canada’s total population.
The active human bridge could serve as a critical conduit to help build, nurture and sustain a
bilateral partnership laid on strong values of democracy and pluralism along with
complementarities.
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Confederation of Indian Industry
The Mantosh Sondhi Centre
23, Institutional Area, Lodi Road, New Delhi – 110 003 (India)
Tel: +91 11 24629994-7 • Fax: +91 11 24626149
Email: [email protected] • Website: www.cii.in
Confederation of Indian Industry
The Confederation of Indian Industry (CII) works to create and sustain an
environment conducive to the growth of industry in India , partnering industry and
government alike through advisory and consultative processes.
CII is a non-government, not-for-profit, industry led and industry managed
organisation, playing a proactive role in India 's development process. Founded
over 115 years ago, it is India's premier business association, with a direct
membership of over 7800 organisations from the private as well as public sectors,
including SMEs and MNCs, and an indirect membership of over 90,000
companies from around 396 national and regional sectoral associations.
CII catalyses change by working closely with government on policy issues,
enhancing efficiency, competitiveness and expanding business opportunities for
industry through a range of specialised services and global linkages. It also
provides a platform for sectoral consensus building and networking. Major
emphasis is laid on projecting a positive image of business, assisting industry to
identify and execute corporate citizenship programmes. Partnerships with over
120 NGOs across the country carry forward our initiatives in integrated and
inclusive development, which include health, education, livelihood, diversity
management, skill development and water, to name a few.
Complementing this vision, CII's theme for 2009-10 is 'India@75: Economy,
Infrastructure and Governance.' Within the overarching agenda to facilitate India
's transformation into an economically vital, technologically innovative, socially
and ethically vibrant global leader by year 2022, CII's focus this year is on revival of
the Economy, fast tracking Infrastructure and improved Governance.
With 64 offices in India, 9 overseas in Australia, Austria, China, France, Germany,
Japan, Singapore, UK, and USA, and institutional partnerships with 221
counterpart organisations in 90 countries, CII serves as a reference point for
Indian industry and the international business community.