India allows FDI from Pakistan

In an unprecedented move, India on Wednesday allowed foreign direct investment (FDI) from Pakistan, though not through the automatic route. Earlier, investment from people residing in Pakistan or from a company based in that country was not allowed.

The Government has allowed all kinds of investments from Pakistan, without a cap on the investment. However, FDI from Pakistan would not be allowed in the defence, space and atomic energy sectors.

“The government of India has reviewed the policy and permitted a citizen of Pakistan or an entity incorporated in Pakistan to invest in India under the government route, in sectors/activities other than defence, space and atomic energy,” stated an official released by the Department of Industrial Policy and Promotion. The decision would be implemented with immediate effect and accordingly, the consolidated FDI policy, effective April 10, 2012, has also been amended.

Steps are being taken to facilitate greater export and imports of necessary items between the two neighbours. In March, Pakistan did away with the positive list with India. This opened its markets to a wide range of Indian goods. However, it introduced a negative list of 1,209 items it couldn’t import from India. India can now export more than 7,500 tariff lines to Pakistan.

NEW NEIGHBOURHOOD TIES
Developments in Indo-Pak bilateral trade ties

• April 28, 2011: Commerce secretaries of India and Pakistan issue a joint statement aiming to boost trade ties, relax visa norms for businessmen, expand trade in petroleum products and power. Also, decide to meet every six months to monitor progress on the proposals
   
• November 2, 2011: Pakistan cabinet approves ‘Most Favoured Nation’ (MFN) status for India, but later retracts and gives in-principle approval for “trade normalisation” with India
   
• February 13, 2012: Commerce, Industry and Textile Minister Anand Sharma leaves for a three-day visit to Pakistan leading a high-powered business delegation under Ficci
   
• February 29, 2012: Pakistan announces transition from positive list to negative list. It also saysnegative list would be removed by December 2012
   
• March 20, 2012: Pakistan notifies negative list with India banning only 1,209 items, while opening the remaining more than 7,500 tariff lines
   
• April 8, 2012: Pakistan President Asif Ali Zardari visits India for a personal trip to Ajmer shrine. This being the first visit by a Pakistani head of state in the last seven years. During a luncheon with Prime Minister Manmohan Singh, both leaders discuss various issues ranging from trade to terrorism
   
• April 13, 2012: Then Home Minister P Chidambaram and Commerce Minister Anand Sharma inaugurate the Integrated Check Post at Attari-Wagah border
   
• August 1, 2012: India officially allows FDI from Pakistan

Pakistan has said it would grant India ‘most favoured nation’ status under the South Asian Free Trade Agreement. Talks are also underway to allow banks from both countries to open branches in the other country. India has also offered to relax its business visa regime for Pakistani businessmen.

Both the central banks – State Bank of Pakistan and Reserve Bank of India – had recently met and finalized a deal to open up banking outlets in each other’s country which would reduce the transaction cost of exporters. The final nod is awaited by India’s Department of Economic Affairs and Department of Industrial Policy and Promotion (DIPP) and the finance ministry of Pakistan.

Similarly, India has also offered to relax business visa regime for Pakistani businessmen travelling to India. The decision is yet to receive formal approval from Pakistan.

In June this year, the newly-built integrated check post (ICP) at Attari-Wagah border to boost trading through the land route was also thrown open. As a result, trading hours would now be increased and would have proper infrastructure for large container vehicles. 

Bilateral trade between both the countries reached $2.7 billion in 2011-12. Both sides have agreed to double it to $6 billion by 2013-14. This was also reiterated during the visit of Pakistan President Asif Ali Zadari to India in April this year.