In what would be a major step forward in establishing strong business ties, a senior government official has said that the Indian government plans to amend the Foreign Exchange Management Act (FEMA) to allow investments from Pakistan.
“The commerce ministry has sent a proposal to the Finance ministry for change in FEMA rules to allow investments from Pakistan,” a senior Indian official, who is accompanying Commerce & Industry Minister Anand Sharma on his official trip to Pakistan, was quoted as saying by manoramaonline.com. Pakistan is currently the only country from where investment is not allowed in India.
“It can be done by simply issuing a notification,” he was further quoted as saying.
Asked whether investments would be sector-specific, the official said: “Our FDI policies are not country-specific. Once there is a change in FEMA regulation, they can invest in whatever sector it is allowed.” To address security concerns, all foreign direct investment (FDI) proposals from Pakistan would have to be cleared through the Foreign Investment Promotion Board, a department of the Indian finance ministry. Bilateral trade between India and Pakistan was $2.7 billion in 2010-11, but there is no two-way investment so far.
All foreign exchange transactions in India are governed by FEMA, which came into force in 2000. This is a civil legislation and the Reserve Bank of India can make changes to allow Pakistani investments after taking approval from Finance ministry.
Sharma said the two countries were mulling an agreement to promote and protect cross border investments.
The two countries have also agreed to normalise visa regimes and move from “positive list” to a short “negative list” trade regime by the end of this month.
Business leaders are enthused by the recent increase in ties between the two countries. “It’s a very good beginning. Things should move step by step,” said Sudhir Jalan, co-chairman of the Kolkata-based Rieter India Private Ltd. The Federation of Indian Chambers of Commerce & Industry President RV Kanoria said businesses of both countries would be happy to invest in cross-border business if proper policies were put in place.
Published in The Express Tribune, February 18th, 2012.