Canada and India move to reset ties as trust in U.S. falters

India and Canada need new friends — and customers. So this week, they put past, painful differences aside to pledge closer ties during Prime Minister Mark Carney’s visit to New Delhi, as U.S. and Israeli strikes on Iran escalated.

But the commitment is far from a full reset. It comes after the assassination of a Sikh activist, Hardeep Singh Nijjar, in Canada in 2023, which caused tensions between India and Canada, with each side expelling diplomats the following year. The Canadian government had accused Indian Minister of Home Affairs Amit Shah, a close ally of Prime Minister Narendra Modi, of plotting to target Sikh separatists in Canada. India has emphatically denied any connection to the killing.

Reema Bhattacharya, head of Asia risk insight, corporate risk and sustainability at Singapore-based risk advisory firm Verisk Maplecroft, told CNBC that a “true reset” in the relationship would depend on whether the visit leads to “sustained, working-level cooperation.”

She added that Nijjar’s killing “remains the single biggest political constraint on the relationship” and is unlikely to fade because “one meeting went well.”

“I’d describe this as a meaningful thaw, moving in the right direction, but not a clean slate,” she added.

Carney and Modi have extra motivation to forge ties, as Donald Trump reorders global trade and the U.S. is waging war on Iran.

“The United States is extremely volatile, not particularly predictable, and frankly, if I may be blunt about it, destabilizing many of the institutions and structures around the world,” Evan Feigenbaum, from the Carnegie Endowment for International Peace, told CNBC on Tuesday.

He said Carney’s trip to India and German Chancellor Friedrich Merz’s recent visit to China “is in no small degree in reaction to volatility from the United States.”

“On the strategic front, India is looking to build closer ties with Western nations beyond the U.S.,” said Arpit Chaturvedi, South Asia advisor at Teneo.

“The bitterness of the Nijjar case lingers but can be overlooked if those officials directly under Carney’s control (i.e. his cabinet) do not bring up the matter,” he added.

On Monday, Carney and Modi vowed to expand bilateral trade to 70 billion Canadian dollars ($51 billion) by 2030. Carney also committed to finalizing a comprehensive economic pact with India by the end of this year.

The two leaders also welcomed the 2.6 billion-Canadian-dollar commercial pact between Cameco Corp and India’s Department of Atomic Energy for the long-term supply of uranium.

But India’s ministry of external affairs confirmed, during the press conference to discuss details of the India-Canada meeting, that the previous uranium supply pact signed in 2015 between Cameco and India was not fulfilled.

The Canadian prime minister said his country has ambitions to become a key supplier of liquified natural gas (LNG) to India.

Canada, which aims to raise LNG production to 50 million tonnes per year by 2030 and 100 million tonnes by 2040, is looking for new markets.

India, meanwhile, plans to double the share of LNG in its energy mix. A Citi report on Monday warned that disruption in the Strait of Hormuz, a crucial waterway for oil and gas, is affecting 60% of India’s LNG imports, amid the escalating conflict in the Middle East.

“It is likely that India would want to open new avenues through alternative routes such as the Pacific and Canada could be a useful partner there,” said Chaturvedi.

But experts say that any long-term LNG contract with Canada will have to be “competitive,” as India is a price-sensitive market.

“Canada’s LNG capacity is still ramping up, and shipping to India is a long route,” said Bhattacharya of Verisk Maplecroft. She added that even if supply is available, aligning timelines, pricing expectations and demand needs “won’t be simple.”

The two countries could see expansion of trade in sectors such as clean energy, critical minerals, fertilizers and IT services, experts said.

On Monday, Carney and Modi said that ties between India and Canada had improved in the last year.

“Prime Minister Carney has not even completed one year in office, yet our relations have leapt forward by a light year,” Modi said in his speech on Monday.

Carney said that there was “more engagement” between the two countries in the last year “than there has been in the last two decades combined.”

But Modi, who has a reputation for personally receiving foreign leaders at the airport, was absent when Carney landed in New Delhi on Sunday.

The depth and pace of any pact between India and Canada will depend “not only on commercial logic but also on political trust,” said Chaturvedi.