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Canada Removes India from 'Peaceful' List, Sparking Economic Concerns

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  Published in Politics and Government on Thursday, February 26th 2026 at 14:25 GMT by BBC
      Locales: CANADA, INDIA

Ottawa - February 26th, 2026 - Canada has taken a significant and potentially far-reaching step in its relationship with India, formally removing India from its list of 'peaceful, stable' countries. The decision, announced earlier this week, is not merely symbolic; it carries substantial implications for Canadian businesses, investors, and the broader economic ties between the two nations. This move follows months of escalating diplomatic tensions centered around allegations of Indian government involvement in the June 2023 killing of Hardeep Singh Nijjar, a prominent Sikh leader and Canadian citizen, in Surrey, British Columbia.

Industry Minister Francois-Philippe Champagne, speaking at a press conference, emphasized the gravity of the situation. "This is a formal designation that has implications for Canadian businesses, for Canadian investors, who are operating in India," he stated. "It's something that we have to take seriously." The alteration directly impacts risk assessments conducted by Canadian companies looking to expand or maintain operations in India. Insurance coverage, particularly political risk insurance, will likely become more expensive, and potentially harder to obtain, for Canadian entities engaged in Indian ventures.

The implications extend beyond mere financial considerations. Canadian banks will now be obligated to conduct more stringent due diligence on transactions involving India, potentially slowing down capital flows. Export Development Canada (EDC), the country's export credit agency, is expected to reassess its support for projects in India, potentially leading to cancellations or delays in funding.

The Roots of the Dispute

The current crisis originated with the allegations surrounding Nijjar's assassination. Canada's Prime Minister Justin Trudeau publicly stated in September 2023 that Canadian security agencies were actively investigating credible allegations linking agents of the Indian government to the killing. This accusation sparked a furious response from New Delhi, which dismissed the claims as "absurd and motivated." India countered by accusing Canada of harboring Sikh separatists who pose a threat to India's national security.

While investigations are still ongoing, and no definitive proof has been publicly presented, the Canadian government has maintained its stance, leading to a significant chill in diplomatic relations. The expulsion of diplomats from both countries further exacerbated the situation.

Impact on Trade & Investment

Before this designation, India was considered a key emerging market for Canadian businesses, particularly in sectors like infrastructure, renewable energy, and education. Trade between the two nations had been steadily increasing, reaching over $10 billion CAD annually in 2023. However, the shift in Canada's risk assessment is now projected to significantly slow down that growth.

"We're already seeing Canadian companies reassess their Indian strategies," says Dr. Anya Sharma, a geopolitical risk analyst specializing in South Asia. "Many are putting expansion plans on hold, while others are actively exploring ways to reduce their exposure. The increase in insurance premiums and the heightened regulatory scrutiny are definitely creating a disincentive for investment."

Some Canadian businesses with significant investments in India are considering diversifying their operations to other countries in Southeast Asia, such as Vietnam and Indonesia, to mitigate risk. Others are focusing on strengthening their domestic operations.

India's Response & Future Prospects

India has vehemently criticized Canada's decision, calling it "unwarranted and based on unfounded allegations." Indian officials argue that Canada's stance is politically motivated and undermines the strong bilateral relationship that historically existed between the two countries. They have also emphasized their commitment to addressing legitimate security concerns raised by Canada through established diplomatic channels.

However, the Indian government has yet to offer substantial cooperation in the investigation into Nijjar's death. This lack of transparency continues to fuel mistrust and hinder any potential for de-escalation.

The future of Canada-India relations remains uncertain. While a complete breakdown in diplomatic ties is unlikely, a full restoration of trust and cooperation appears distant. The current situation highlights the increasing importance of geopolitical risk assessment in international business and the potential consequences of unresolved disputes. Experts predict that the 'peaceful, stable' designation will remain withdrawn for the foreseeable future, pending significant progress in the investigation and a demonstrable commitment from India to address Canada's concerns. The next six months will be crucial in determining whether the two nations can navigate this challenging period and rebuild a more constructive relationship.