The Reserve Bank on Wednesday notified the decision to allow foreign direct investment from Pakistan.
"It has now been decided that...a person who is a citizen of Pakistan or an entity incorporated in Pakistan may, with the prior approval of the Foreign Investment Promotion Board, purchase shares and convertible debentures of an Indian company under FDI Scheme, subject to the terms and conditions specified...," the RBI said.
However, it said that the Indian company, receiving such foreign direct investment (FDI), should not be engaged in sectors like defence, space and atomic energy and "sectors/activities prohibited for foreign investment".
According to experts, this decision would help the Pakistan government to convince the MFN (Most Favoured Nation) opponents about its trade bargains with India.
Pakistan has yet to notify granting the MFN status to India.
However, Pakistan had partially liberalised its trade regime with India in March when it shifted from positive list rules to negative -- meaning barring 1,209 items, Islamabad would allow import of all other Indian goods.
India had granted the MFN status to Pakistan way back in 1996. The MFN status means that India gives trade treatment to Pakistan at par with its other partners.