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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

5

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

9

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


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


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.



3 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.


2 CII-CCCE Report to Ministers of India- Canada CEO Roundtable, September 08



5 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.

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� 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

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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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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


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.

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