India is actively contemplating changes in the Foreign Exchange Management Act (FEMA) to allow foreign direct investment (FDI) from Pakistan in a move expected to significantly improve bilateral trade relations.
“India has taken in-principle decision as part of trade normalisation process to allow foreign direct investment from Pakistan...,” commerce and industry minister Anand Sharma said after a meeting with his Pakistani counterpart Makhdoom Amin Fahim here.
The department of industrial policy and promotion (DIPP) has sent a proposal to finance ministry for changes in FEMA. At present, Pakistan is the only country covered by the FDI restrictions related to the FEMA.
“Procedural requirements (for FDI from Pakistan) are underway. It will notified soon,” Sharma said. Talks are also on to allow banks from both the countries to open branches in each other's territory, he said. “RBI and State Bank of Pakistan are in favour of opening branches,” Sharma added.
“There has been progress in allowing banking services from both sides. In-principle we have agreed,” Pakisatani minister Fahim said. In order to address security concerns, FDI proposals from Pakistan can be routed through the Foreign Invest-ment Promotion Board (FIPB).