The Government has finally allowed foreign direct investment (FDI) from Pakistan in all sectors, barring defence, space and atomic energy. This is yet another move towards complete normalisation of ties with Pakistan.
The formal decision comes over three months after Commerce and Industry Minister Anand Sharma had said on April 13 that India had, in principle, agreed to allow FDI from Pakistan.
The Press Note, notified on Wednesday, states that the Government has reviewed the FDI policy and decided to permit Pakistani citizens and entities incorporated in that country to make investments in India, under the Government route, in sectors other than defence, space and atomic energy.
This would mean that such investments will have to get the Foreign Investment Promotion Board’s (FIPB) approval. FIPB clearance is also meant to take care of security concerns.
Earlier, the Government had allowed FDI from Bangladesh under the approval route.
Official sources had earlier said that delay in the notification was affecting the progress of talks among South Asian countries on agreements on services trade and investment.
Islamabad had questioned India on how it could push for liberalisation of services and investment in South Asia when New Delhi was yet to accord non-discriminatory treatment to Pakistan on FDI.
The Department of Industrial Policy and Promotion and the Finance Ministry were in talks to decide whether the notification on changes in the FDI policy should precede changes in Foreign Exchange Management Act (FEMA), or vice-versa.
Now that the FDI policy amendments have been notified, the Government will have to amend FEMA, which bans such investments from Pakistan.
Earlier, Pakistan had decided to give India the most-favoured nation status by this year-end. Islamabad had also shifted trade with India from a restrictive ‘positive list’ system to an easier ‘negative list’, paving the way for more goods to be traded.
Talks are also on between the banking regulators of both the countries for allowing opening of bank branches.