(Bloomberg) -- Canadian Prime Minister Justin Trudeau accused India’s government of masterminding the assassination of a prominent Sikh leader, an explosive allegation that threatens to alter perceptions of the South Asian democracy among US allies.
Most Read from Bloomberg
Prime Minister Narendra Modi’s administration on Tuesday forcefully denied any involvement in the June murder of Hardeep Singh Nijjar, a Canadian citizen who has been at the forefront of a movement calling for an independent Sikh homeland in India called Khalistan. Canada expelled a top Indian diplomat, prompting Modi’s government to do the same in a tit-for-tat action.
“Allegations of the government of India’s involvement in any act of violence in Canada are absurd and motivated,” its Ministry of External Affairs said in a statement Tuesday. It accused Canada of failing to take action against “Khalistani terrorists and extremists.”
Canada’s accusation puts the US and its allies in an awkward spot shortly after leaders including President Joe Biden hailed close ties with India at the Group of 20 summit earlier this month. They were instrumental in bolstering India’s position as a counterweight to China, agreeing to watered-down language over the war in Ukraine with a broader goal of propping up the US-world order among emerging economies that constitute the Global South.
But the burgeoning partnership between India and the West now faces a critical test after Trudeau on Monday said there were “credible allegations” of India’s involvement in Nijjar’s murder. His government has yet to lay out the evidence.
Read more: How India-Canada Relations Crumbled Amid Sikh Leader’s Murder
“Canada has declared its deep concerns to the top intelligence and security officials of the Indian government,” he said in the House of Commons in Ottawa. “Any involvement of a foreign government in the killing of a Canadian citizen on Canadian soil is an unacceptable violation of our sovereignty,” he said.
Modi on Tuesday made no reference to Canada’s allegations when he addressed parliament in a 40-minute speech, focusing instead on India’s potential to become one of the top three economies in the world.
The US was “deeply concerned” about the allegations disclosed by Trudeau, National Security Council spokesperson Adrienne Watson said in an emailed statement. “It is critical that Canada’s investigation proceed and the perpetrators be brought to justice,” Watson said.
Australia also weighed in, with a spokesperson for Foreign Minister Penny Wong expressing concern. “We are closely engaged with partners on developments,” the spokesperson said. “We have conveyed our concerns at senior levels to India.”
Read more: How India and Canada’s Relations Crumbled After Killing of Sikh Leader
Trudeau told lawmakers he raised these concerns “personally and directly” with Modi at the G-20 meetings. Modi, meanwhile, used the informal exchange to criticize the Canadian government for allegedly allowing Sikh secessionist groups to operate in the country.
The Canadian prime minister also told parliament his government would pressure India to cooperate in investigations into Nijjar’s shooting on June 18 outside a temple in British Columbia. Nijjar advocated for an independent Sikh homeland in northwestern India and his death sparked protests among supporters of the separatist movement, which alleged the Indian government was behind the killing.
India Must Stop the Bleeding From Canada Killing: Mihir Sharma
The relationship between the two countries “is now at a very downward trough,” said John Kirton, director of the G-20 Research Group at the University of Toronto. “It’s a very serious issue, but at this point it’s still in the realm of allegations.”
The festering ties threaten to derail plans for an early-stage trade deal. Both nations this year said they expected to agree to a trade pact by end-2023, but it was put on hold ahead of the G-20 summit. Canada last week postponed a trade mission to India in October.
Trade talks with Canada will continue to be on hold until “certain political developments” are resolved, according to a senior Indian government official.
While Canada isn’t among India’s top 20 trading partners, any breakdown in negotiations will be a blow to India’s efforts to position itself globally as a supply chain alternative to China. In 2022, India had a $2.87 billion trade surplus with Canada.
The fraying bilateral ties are centered around the Sikh population in Canada — one of the highest outside their state of Punjab in India, and their demands for a separate homeland. Indian officials have long alleged that Canada has been too comfortable with Sikh separatists.
Over the years, Sikhs have also become an important political group in Canada. Trudeau has multiple Sikhs in his administration and his government is propped up in the legislature by the New Democratic Party led by Jagmeet Singh, who has said that he supports the idea of “self-determination,” citing independence movements in Quebec and elsewhere.
“That Canadian political figures have openly expressed sympathy for such elements remains a matter of deep concern,” India’s Ministry of External Affairs said in the statement on Tuesday.
Sikh groups have protested at Indian diplomatic outposts across Canada in recent years. New Delhi characterized a June demonstration outside its High Commission as an “attack” and said its anti-terror agency was investigating.
India is especially concerned about a banned secessionist group, which fought to create an independent state called Khalistan in the 1980s and 1990s.
The movement made headlines earlier this year when a self-styled preacher, Amritpal Singh, called on his followers to revive it. He was later arrested after a manhunt, but the Khalistan movement continues to find some support among the Sikh diaspora, especially in the UK, Australia and Canada.
--With assistance from Jennifer Jacobs, Stephen Wicary, Vrishti Beniwal, John Harney, Shruti Srivastava, Sudhi Ranjan Sen and Natalie Obiko Pearson.
(Updates with Modi’s address in parliament and more context.)
Most Read from Bloomberg Businessweek
©2023 Bloomberg L.P.