Financing India: India and Canada relation to touch 100 billion CAD

The Free Press Journal in association with NMIMS, SIES and Invest India is organising a nine-part webinar series under the banner ‘Financing India’.

The series started on October 15, 2020 and the first focus country was Canada. The panellists for the Canada session were (in alphabetical order) Shruti Chandra, Assistant Vice President, Invest India; Annie Dubé, Consul General of Canada in Mumbai, India; and Jaimin Shah, co-founder and managing director of DEV Information Technology Ltd, India and DEV Info-Tech North America Ltd, Canada. The session was moderated by RN Bhaskar, consulting editor, FPJ, and opening and closing address were given Dr Paritosh Basu, Senior Professor and Chairperson MBA (Law), NMIMS School of Business Management.

Edited excerpts:

Canada-India relations

Annie Dubé, Consul General of Canada in Mumbai: Canada-India relation is the cornerstone for financing India. Canada can play a significant and strategic role in India’s part of sustained economic growth. Canada-India relationship has reached an exciting phase in terms of numbers and people-to-people ties.

In the last five years, the momentum in our commercial relationship has hit a new high in terms of number across the board. The year 2019 was no different but obviously, 2020 will be different.

In 2019, the two-way trade between both countries was around 11.5 billion CAD (Canadian dollars), and in the case of services, it was another 3 billion CAD.

Shruti Chandra, Senior Assistant Vice President, Invest India: India and Canada are historic allies and partners in trade and commerce. Both countries are connected by the shared values of democracy, pluralism and interpersonal connections. Our relationship is marked by mutual trust —both strategic partners have always stood by each other.

Over the years, the relationship has developed into a structural partnership both at the bilateral level and international level.

Jaimin Shah, Co-founder and Managing Director of DEV Information Technology Ltd, India: When my company started its journey, we were not looking at Canada. Usually, when people talk about IT, they look at the US and not Canada — just like Gujarat, which is not considered as a place for IT companies. In 2012, we acquired a Canadian company in Toronto. We established our operations in North America through Canada.

If you look at trade between India, the US and Canada, the trade is six billion per week. We can see this as a huge opportunity which Canada and India can leverage in the next few years. The reason for choosing Canada over the US was because there are a positive trade and investment environment between both countries. The welcoming approach is what made us choose Canada.

Investments between both countries

Annie Dubé: The total amount of investments both ways are to the tune of 70 billion CAD which includes FDI (foreign direct investment), portfolio investments, among others.

Canadian companies investing in India are going bullish in the Indian market.

Institutions investors Brookfield and Fairfax Financial Holdings Ltd alone have invested around 25 billion CAD in India. Several other Canadian institutional investors have been setting up offices in India. Their collective investments are estimated to exceed 45 billion CAD. These strategic investments are in line with the government of India’s priority.

From the Canadian Pension Funds’ and institutional investors’ perspective, the timeline for these investments is not 5-6 years but 25 years. The motivation behind these investments goes beyond making fees and profits, it is also about creating a better society and aiming for a long-term economic and social impact. If you look at the investments from Canada, you will realise investments are in projects that will lead to long-term growth in India, that is why we are strategic partners in that sense.

The commercial partnership is over 85 billion CAD between India and Canada, which includes trade. This 85-billion-CAD partnership shows the significance of this relationship. Thus, it is important to talk about the relationship that is going to hit 100 billion CAD soon.

Shruti Chandra: In terms of FDI, India continues to be a favourite destination for Canadian investors. Today, Canada ranks among the top 20 countries investing in India. Canada has invested approximately USD 2 billion in direct equity inflows in India. Of that in the last three years alone, USD 1 billion has been invested in India by Canadian companies. This shows the momentum among investors.

Canadian institutional investors have made significant commitments in India by investing funds to the tune of USD 30 billion in the last decade, most of which have come in the last five years.

Traditionally, we have seen a lot of investments in financial services and infrastructure. Major Canadian investors have already invested more USD 15 billion on national highways, airports, real estate and logistics.

CEPA, FIPPA and FTA: An impetus to the bond

Annie Dubé: Comprehensive Economic Partnership Agreement (CEPA), Free Trade Agreement (FTA) and Foreign Investment Promotion and Protection Agreement (FIPPA) have been constantly discussed. So that the environment is more predictable for investors and can support investment and trade both ways.

CEPA and FIPPA would help create new opportunities and deepen economic relationships. Until that is fully negotiated and agreed upon, we continue to create linkages and build opportunities for our exporters.

Without these agreements, we feel we are not living up to our potential. Tools like FTA or any forms of tariff reductions or CEPA can help trade to flow smoothly. These agreements will not be limited to goods and services but beyond.

Shruti Chandra: India is looking at becoming the trade hub of the world. So definitely, India is in the forefront when it comes to trading partners. India due to its huge MSME base also has to collaborate and have the right agreements in place. This will enable India to become a strong partner and also protect its domestic economy.

We are actively looking at partnering with all countries. Best relationships are those where you have gone into one after getting an overview of the relationship. In this case, we are evaluating it.

For Canadian companies as well, India is never the first point of call. So both countries will see growth, as and when the final details (of these agreements) come through. Both governments are actively pursuing it. It will not be limited to products and trade but much more.

Annie Dubé: India has put in a lot of efforts already in improving its investment ecosystem. We have been negotiating with India for some time now for FIPPA. So that investors know that the environment is predictable (and their investments are safe). The predictable environment is key to long-term investment. Canada is not a threatening partner but we believe in mutual growth. India and Canada are complementary. It will boost investor sentiment’s both ways.

Start-ups collaboration between both countries

Jaimin Shah: Recently, our Prime Minister had said that India will be the AI (Artificial Intelligence) studio. Adding to it, I would like to say that Canada will be the technical backbone of that studio if we collaborate well.

There are many organisations in Canada like Next Canada, Waterloo and many other incubators. All these incubators are thriving with ideas and products. And when it comes to finding markets — India will give them the market. These are the areas where we can align.

Many technical start-ups in India are seeking technical help and there are many universities in Canada that are offering support to these start-ups.

Shruti Chandra: Canada is ranked among the top countries when it comes to the start-up ecosystem. India has the third largest unicorn community. Thus, there is an immense opportunity for both nations to collaborate and innovate together.

Canada: The less travelled North America

Jaimin Shah: In India, we talk about Toronto and Vancouver but not places like Prince Edward Island in North America. But these are the places where small and medium businesses can take advantage by entering into the market; grabbing the resources available and establishing a footprint into North America through these regions. In this area, we see a lot of opportunities for start-ups.

As an entrepreneur and businessperson, you need to explore areas that are less travelled, and Canada is less travelled as far as business is concerned. I would suggest that one should grab the opportunity before it becomes the next US.

What COVID-19 has brought to the table?

Annie Dubé: There is an ongoing keenness on both sides to do more and the pandemic has obviously amplified that. In terms of policy priority, we expect the government of India to ramp up the investment attraction efforts.

The relationship between both countries is strong and the momentum is in the right direction. And the pandemic has brought about new challenges. Due to these challenges, there is no better time than this for stronger Canada and India relations.

Jaimin Shah: Recently after the pandemic, the economic support which Canada has introduced is outstanding — be it your cash flow or rental subsidiaries or any other subsidiaries —and you get it in days. As far as ease of doing business is concerned, I have not seen an ecosystem where there is no harassment from the government authorities. During the pandemic, the efforts were a lot more evident. So even Indians investing in Canada is an excellent proposition.

Shruti Chandra: We started a business immunity platform for companies that were facing issues during the lockdown. This was unprecedented. We had 9,000 queries which were resolved in an average resolution time of six hours.

While the private sector can adapt to change in technology quickly, the pandemic has brought about a forced change in the government perspective as well. Of course, the government is committed to Digital India but this pandemic has expedited the process. The government has definitely changed the way it operates.

The pandemic will also give a lot of opportunities to start-ups and we are seeing new start-ups are coming up. This will allow start-ups between both countries to collaborate much more.

Annie Dubé: The pandemic has accelerated the process of doing business online. People travelling back and forth will reduce. While some components will be virtual but the physical aspect will remain in some instances.

Sectors: Hot pancakes or potential to be that

Annie Dubé: We have seen exponential growth in collaboration in sectors such as technology, water and sanitation, infrastructure, smart cities as well as energy. India can certainly take advantage of Canada’s sectoral strength in important sectors like aerospace; agriculture and agro-food; automotive component; education; defence and security; and emerging technologies like AI, forestry and ICT.

Shruti Chandra: Today, we have 600 Canadian companies which are actively operating in India across sectors. We have seen continued interest in sectors such as services, energy, advanced manufacturing, construction and education.

India’s infrastructure requirements present a significant opportunity to many more Canadian investors to make India a manufacturing, logistics and warehousing hub.

There are many opportunities and there are various sunrise sectors in India and we see a lot of emerging areas for future collaboration.

There are investment opportunities in the renewable sector like the investment in solar cells and modules manufacturing facilities etc. There are increased opportunities in construction and smart cities as well.

Canadian pension funds are increasingly investing in India’s infrastructure and financial services sector and are also now looking at making long-term brownfield investments through investing in assets such as railways, airports and roads.

Canada has been a long-standing leader in agriculture, dairy, animal husbandry, and processing and post-harvest management. Canadian investments in food safety solutions, mega food parks and supply-chain management and cold storage infrastructure will benefit business interests of Indian farmers, cooperatives and industries as much.

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