Geopolitical Risk and Investment Resilience: Navigating India-Canada Tensions in Energy and Infrastructure

The India-Canada relationship has long been a study in contrasts: a shared commitment to democratic values and economic complementarity, juxtaposed with periodic strains over Sikh separatist tensions. The 2023 assassination of Hardeep Singh Nijjar, a Canadian Sikh pro-Khalistan activist, ignited a diplomatic crisis that reverberated across sectors, particularly energy and infrastructure. As of September 2025, the normalization of ties offers a glimpse of stability, but the scars of the past two years underscore the fragility of cross-border investments in politically sensitive environments.

The Tension-Driven Investment Pause

The fallout from Nijjar's murder led to reciprocal expulsions of diplomats and a suspension of trade negotiations, casting a shadow over bilateral investments. Canadian pension funds, including the Canada Pension Plan Investment Board (CPPIB) and Ontario Teachers' Pension Plan (OTPP), which collectively hold billions in Indian infrastructure and energy assets, adopted a cautious stance. For instance, CPPIB's CAD 283 million investment in India's National Highways Infra Trust (NHIT) and OTPP's joint $438 million stake in toll road projects were placed in a “wait-and-watch” modeCanadian Pension Funds continue investing in India amid diplomatic tensions^[1]. Smaller Canadian funds, meanwhile, delayed new investments, with flows dropping from $22 billion in 2021 to $2.6 billion in 2023How tensions between India and Canada can impact investment flows, dealmaking^[5].

Energy projects, particularly in renewables, faced indirect consequences. India's Central Transmission Utility of India Ltd (CTUIL) revoked grid access for 17 GW of delayed clean energy projects in 2025, partly due to administrative bottlenecks but also amid heightened geopolitical uncertaintyCanadian Pension Funds continue investing in India amid diplomatic tensions^[1]. While not directly linked to India-Canada tensions, the broader climate of instability likely exacerbated hesitancy among foreign investors, including Canadian firms.

Diplomatic Reset and Strategic Alignment

By mid-2025, both nations signaled a reset. Prime Ministers Narendra Modi and Mark Carney agreed to reestablish high commissions and restart trade talks under the Early Progress Trade Agreement (EPTA) frameworkIndia and Canada signal a reset of relations nearly two years after ...^[3]. High-level security dialogues, such as the September 2025 meeting between National Security Advisers Ajit Doval and Nathalie G. Drouin, emphasized counter-terrorism cooperation and intelligence sharingIndia, Canada NSAs Hold Talks In New Delhi To Boost Security Cooperation^[2]. These steps suggest a prioritization of economic and strategic interests over lingering political disputes.

The resumption of EPTA negotiations and renewed focus on critical minerals and defense partnerships indicate that India and Canada are recalibrating their relationship to align with global supply chain dynamics. For instance, Canada's abundant lithium and cobalt reserves could complement India's renewable energy ambitions, while Indian infrastructure expertise offers value in Canada's resource extraction sectorsIndia Canada Trade Talks 2025: Restarting Economic And Strategic Cooperation^[6].

Asset Valuations and Investor Sentiment

Despite the diplomatic thaw, asset valuations remain sensitive to geopolitical risks. Canadian pension funds, which prioritize long-term stability, have maintained existing investments but avoided new commitments until clarity emerges. For example, CPPIB's 2.7% stake in Kotak Mahindra Bank Ltd. and OTPP's infrastructure holdings have seen minimal valuation shifts, reflecting the resilience of India's financial marketsCanadian Pension Funds continue investing in India amid diplomatic tensions^[1]. However, smaller, high-risk projects—such as solar farms in Punjab or hydroelectric ventures in the Himalayas—remain vulnerable to delays or cancellations due to regulatory uncertaintyIndia revokes grid access for 17 GW of clean energy projects, says...^[4].

Conclusion: Balancing Risk and Opportunity

The India-Canada experience highlights the dual-edged nature of geopolitical risk. While tensions can disrupt short-term investment flows and project timelines, the underlying economic synergies—particularly in energy and infrastructure—remain robust. Investors must navigate this landscape with a nuanced understanding of both political volatility and strategic alignment. As both nations work to stabilize their relationship, the coming months will test whether trust can be rebuilt swiftly enough to unlock the full potential of their economic partnership.