The Finance Ministry is likely to shortly clarify the guidelines for the outbound investment scheme for Indian companies and banks to invest in Pakistan.
The Indian Government is also looking at direct air connectivity between New Delhi and Islamabad. At present, the financial centres of the two countries, Mumbai and Karachi, have air connectivity.
Meanwhile, the Commerce Secretary level talks between the two neighbours are expected to take place next month. The talks will take stock of progress on providing Most Favoured Nation (MFN) status, trade by road route and further pruning of tariffs, apart from other issues.
Commerce Secretary S.R. Rao said, “We expect the Finance Ministry to come out with details about Outbound Investment Scheme to come out on the eve of External Affairs Minister S.M. Krishna’s visit to Pakistan.” Krishna is scheduled to go to Pakistan for three days starting September 7.
Outbound mechanism will be under the semi-automatic route. Under the new mechanism, the screening committee of the Reserve Bank of India will examine the proposals and accordingly, the decision will be taken.
“The primary issue is to ensure that money going out should not be invested to finance illegal trade or wrongful activities,” Rao explained.
The banking sector is going to be the first to experience the new scheme.
Earlier, Yaseen Anwar, Governor of the State Bank of Pakistan, Pakistan’s central bank, had announced that India and Pakistan had agreed to allow two banks each from both the countries to set up branches across the border.
From India, it will be State Bank of India and Bank of India while National Bank of Pakistan and United Bank will represent Pakistan here.
Expanding Business
One of the new issues likely to be included during the secretary level talks is air connectivity. India feels that lack of air connectivity is impacting business ties. “The Civil Aviation Authorities of both the countries should be looking for direct air connectivity between the two capitals,” Rao added.
Tariff Line
The Commerce Secretary also said that notification for pruning the tariff line list for trade with Pakistan is also expected in the first week of Pakistan.
Only last week, the Cabinet approved reduction of 30 per cent or 264 tariff lines from the SAFTA Sensitive list for Non Least Developed Countries (NLDCs). This will reduce India’s Sensitive list for Pakistan from 878 to 614 tariff lines.
Among the 264 tariff lines, 155 belong to agricultural produce, 106 belong to textiles and three to petro products.