Mark Carney’s transition from a globally respected central banker to Canada’s Prime Minister marks a dramatic shift in leadership dynamics. His tenure at the Bank of Canada and the Bank of England established his reputation as a financial crisis manager, but political leadership presents an entirely new set of challenges. He inherits a fractured political landscape, a tense relationship with India, and an increasingly protectionist America under Donald Trump.
While his economic acumen gives him credibility in managing fiscal policy and trade relations, his biggest tests will be diplomatic—repairing strained ties with India, navigating a hostile White House, and restoring public trust in Canada’s institutions. His leadership style, devoid of political baggage but rooted in financial pragmatism, will define whether he succeeds in stabilizing Canada’s position on the global stage.
Carney takes charge amid deepening political divides. The Liberal Party has suffered from declining public confidence, particularly in Western Canada, where Trudeau’s policies alienated oil-dependent provinces like Alberta and Saskatchewan. Meanwhile, right-wing populism has gained traction, mirroring global trends. His lack of electoral experience could be a vulnerability, but his credibility as an economic strategist may help him regain voter trust. Managing inflation, stabilizing interest rates, and addressing affordability concerns will be immediate priorities. Gaining support from both progressive and conservative voters will be crucial for governing effectively, while restoring confidence within his party and among centrist voters will determine his political longevity.
One of Carney’s most urgent foreign policy tasks will be repairing Canada’s severely damaged relationship with India. Under Justin Trudeau, ties with New Delhi deteriorated due to allegations of Indian intelligence involvement in the killing of a Sikh separatist leader, Hardeep Singh Nijjar, in British Columbia. The diplomatic fallout led to mutual expulsions of diplomats and heightened tensions between both nations. Initiating direct talks with Indian Prime Minister, Narendra Modi and senior officials to rebuild trust while avoiding public accusations that could further antagonize relations will be crucial.
Addressing India’s concerns about pro-Khalistan extremism operating from Canadian soil and strengthening counterterrorism collaboration with India will be necessary steps. Reviving discussions on the stalled Canada-India Comprehensive Economic Partnership Agreement (CEPA) and encouraging Canadian investments in India’s technology and infrastructure sectors while attracting Indian investments into Canada’s energy and AI industries will provide a constructive path forward. Easing tensions surrounding visa restrictions for Indian students and professionals and enhancing academic and cultural exchanges will reinforce strong diaspora-driven relations.
One of the most contentious issues Carney will face is managing the presence of Khalistani elements in Canada, which has been a major source of friction with India. The Trudeau government’s perceived soft stance on Khalistani extremists led to a diplomatic crisis, especially after the Hardeep Singh Nijjar killing controversy. If Carney wants to restore relations with India while maintaining domestic political stability, he must walk a fine line between safeguarding national security and respecting democratic freedoms.
Moving away from Trudeau’s overly accommodative approach towards pro-Khalistan groups, Carney, who does not have a political history of appeasing any particular voter bloc, may choose a more pragmatic and security-driven approach rather than an electorally motivated one. Unlike Trudeau, he is unlikely to publicly align with Khalistani sympathizers and may prioritize Canada’s international credibility over domestic political gains.
India has long sought stronger action against Khalistani extremism, including hate speech, radicalization, and terror financing. Directing CSIS and the RCMP to closely monitor extremist groups and increasing surveillance on pro-Khalistan funding networks suspected of laundering money for extremist activities will be key measures. Implementing tighter regulations on extremist events glorifying violence against India and working with Sikh community leaders to counter radical narratives while promoting moderate voices will be essential.
Enhancing intelligence-sharing with India’s RAW and IB, considering deporting individuals involved in terrorist financing or inciting violence against India, and establishing a bilateral security task force to monitor extremist activities could signal Canada’s commitment to addressing India’s security concerns. Reviewing the legal framework that allows Khalistan referendums under “freedom of expression” laws and possibly classifying them as a national security threat if intelligence agencies confirm links to extremist funding could further ease tensions. Privately assuring India that Canada will not tolerate separatist activities that threaten India’s sovereignty while ensuring that actions taken against extremist elements do not trigger backlash from Sikh groups will be a difficult balancing act.
The Indian government has repeatedly pressured Canada to take stronger action against Khalistani groups, and Carney could proactively engage with New Delhi to rebuild trust. Resuming diplomatic exchanges suspended under Trudeau due to the Nijjar controversy and reviewing pending extradition requests on a case-by-case basis based on strong legal evidence will be vital. Expanding cooperation between CSIS and India’s IB and RAW on intelligence-sharing and conducting joint efforts to identify Khalistani terror funding sources will reinforce Canada’s commitment to addressing security concerns.
Differentiating between moderate Sikhs and extremist Khalistanis, engaging Sikh organizations that oppose separatism but want protection of Sikh identity and religious rights, and framing any crackdown on extremist elements as a measure to protect Canada’s national security rather than an anti-Sikh policy will be necessary to avoid alienating Canada’s large Sikh population. Ensuring that law enforcement actions target violent elements rather than peaceful Sikh advocacy groups will be a crucial aspect of his strategy.
Carney faces a delicate balancing act—restoring trust with India while managing domestic political sensitivities. His lack of political baggage allows him to take a fresh approach, while his global reputation ensures India takes his diplomatic overtures seriously. Leveraging economic incentives to reset relations with India could provide him with a major diplomatic victory early in his tenure. However, he will have to contend with political pressure from pro-Khalistan groups in Canada, accusations of suppressing free speech, and opposition from left-leaning Liberals who supported Trudeau’s stance.
Ultimately, if he implements a firm but balanced policy—cracking down on extremists while protecting legitimate Sikh voices—he can repair Indo-Canadian ties without triggering domestic instability. A successful reset of Canada-India relations could strengthen Canada’s position on the global stage, but missteps—especially on the Khalistan issue—could prolong tensions and risk Canada’s economic interests in South Asia.
(Writer is strategic affairs columnist and senior political analyst)
