India's moment is hurt by interference label

 India's moment is hurt by interference label

By Una Galani October 15, 2024

MUMBAI, Oct 15 (Reuters Breakingviews) - For a developing country courting overseas investment, seeking to embed itself into the world's supply chains, and encouraging its companies to go global, it is unhelpful, to say the least, to be dubbed by a rich country as the second-most significant "foreign interference" threat after China.

That's the label Canada's National Security and Intelligence Committee of Parliamentarians applied, to India in June. The situation worsened dramatically on Monday. Ottawa linked,Indian government agents to a number of homicides, including the murder in British Columbia of a Sikh separatist leader who India had branded a “terrorist”. New Delhi called these charges "preposterous", and the two countries expelled each other's senior diplomats.

Granted, the killing allegations have been stirring, opens new tab for a year, and direct economic consequences seem small: India accounted for barely $6.5 billion, or less than 1% of Canada's trade in 2020. But there was already broader friction between the West and India over these and other human rights issues. The risk of these issues actually breaking relations between them is not lost on politicians, executives and investors in the developed world. They want the $4 trillion fast-growing economy to realise its potential as a counterweight to China in Asia, as a partner in both defence and manufacturing.

That's why the cost of the ruction with Canada may be so insidious. Canada is home to some of the world's big global investors, from Brookfield (BAM.TO), opens new tab to the Canada Pension Plan Investment Board and Ontario Teachers' Pension Plan. Their leaders, who between them manage some $1.7 trillion in assets may suddenly, for example, find it awkward to travel and negotiate deals in India if their government is effectively persona non grata in the emerging market.

The nature of the dispute means the bilateral relationship might well remain sour until after national elections in India, not due for more than four years. The stakes of a similar case underway in the United States - which officials from India are expected to address this week in Washington - are far higher on most strategic and financial fronts for both of those countries: they share a strengthening bond,that is weak on trust.

Politicians on all sides may ultimately find a way to look beyond this highly charged situation. But if it shunts perceptions of India into the same bucket as China, the country's status as a land of opportunity will suffer.

CONTEXT NEWS

Canada expelled six Indian diplomats including the high commissioner on Oct. 14. It came after Ottawa linked agents of the South Asian country’s government to homicides, including the murder of a Sikh separatist leader.

India retaliated by ordering the expulsion of six high-ranking Canadian diplomats including the acting high commissioner and said it had withdrawn its envoy from Canada, contradicting Canada's statement of expulsion.

Ties between the countries have been frayed since Canada's Prime Minister Justin Trudeau said last year he had evidence linking Indian agents to the assassination of Sikh leader Hardeep Singh Nijjar on Canadian territory.

India’s ministry of external affairs said in a statement that the Trudeau government has “consciously provided space to violent extremists and terrorists to harass, threaten and intimidate Indian diplomats and community leaders in Canada” and that multiple extradition requests in respect of organised crime leaders living in Canada have been disregarded.

The United States has also alleged that Indian agents were involved in an attempted assassination plot against another Sikh separatist leader in New York last year. An Indian government committee investigating Indian involvement in the foiled murder plot will meet U.S. officials in Washington in the coming days, the State Department said on Oct. 14.