India to allow foreign direct investment from Pakistan
Liberalising heavily restricted trade and investment flows is now the driver of peace efforts between the neighbours, whose fragile ties were shattered when militants attacked the Indian city of Mumbai in 2008.
"India has taken an in-principle decision, as a part of the process to deepen our economic engagement, to allow foreign direct investments from Pakistan in India," said Trade Minister Anand Sharma at a news conference with his Pakistani counterpart.
Under current rules, Pakistani citizens cannot directly invest in India. Investment flows are unlikely to surge, but the move will go some way to addressing concerns by Pakistani businessmen that India places too many restrictions on them.
More than 600 Pakistani businesses are in New Delhi this week at a trade fair to promote their products to the Indian market.
In the face of some domestic opposition, the government of Pakistan President Asif Ali Zardari last November vowed to grant India most favoured nation status, which ends restrictions that require most products to move via a third country.
The move was hailed by India and the two countries are now focused on resolving economic issues before moving on to more intractable problems.
Sharma also said an agreement to relax restrictions on visas for Pakistani businessmen was almost ready.
Later on Friday, Sharma and the Pakistani trade minister, Makhdoom Amin Fahim, will open an expanded border trade terminal at Wagah, between Lahore and Amritsar.
With a capacity to handle about 600 trucks a day, the border crossing is expected to help bring trade to $8 billion annually from the current level of $2.6 billion, Indian industry chamber ASSOCHAM said in a study published this week.
COMMENTS (77)
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I agree with DKaimkhani, with two stock markets in close proximity investment in one could lead to the downfall of the other. Investment needs to be split or managed in order to act responsibly.
If Western Europe can have a single currency after decades of enmity, why is it impossible for India and Pakistan?
Dear Pakistani Biraders,
Don't feel dejected by this news. This is part of my grand top secret plan for Ghazwa-e-Hind.
Lovingly Yours, Zaid Hamid
I think we should use this opportunity. We should invest good in India and use the investment as our insurance for future. If ever India tries to stop our water, we will be able to pull the plug on Indian economy by pulling out all our investments and crashing their market. I think this FDI thing should be used strategically.
@Truth Seeker: Well, Hafiz Sayeed has invested so heavily in your country. Reap the benefits and enjoy your life, why do u need India to invest in there??
First of all.. Why are all of us fighting or taunting each other ?? Its really sad to see that even today, people have grudges against each other for no apparent personal reason.. Lets act as mature people.. Lets hope the outcome of the FDI turns out good benefiting both the countries, which I'm really dicey about.
"NEW DEHLI: India has decided to allow foreign direct investment from Pakistan, India’s trade minister said on Friday". In other words this is hazardous and harmful for already Pakistani weak economy because in India as compared with Pakistan labor-cost,electricity,gas and POL' prices are low and already various Pakistani industries have been shifted to Bangladesh and China due to electricity and gas crises and high labor-cost and Pakistani direct investment in India will boost Indian economy than Pakistani economy.
"NEW DEHLI: India has decided to allow foreign direct investment from Pakistan, India’s trade minister said on Friday". In other words this is hazardous and harmful for already Pakistani weak economy because in India as compared with Pakistan labor-cost,electricity,gas and POL' prices are low and already various Pakistani industries have been shifted to Bangladesh and China due to electricity and gas crises and high labor-cost.
I consider it as a Good News for both countries and their people at large. I hope wolfs with sheep skins do not take advantage. .
@Truth Seeker: "who don't you guys invest in Pakistan"? Good question. Ask your establishment. Indian companies could invest many times more than what the Americans do but the Mullah-Military mindset is afraid that Pakistan might end up in an Indian stranglehold.
I think this would benefit Pakistan in the longer run. Experience gained from bigger markets certainly helps smaller economies to grow.
Indians responses are sounding more and more like those telemarketers who read from a script with absolutely no input from their side. It seems like some of these gentlemen think that saying the same thing over and over again somehow makes it more convincing. That just confirms my understanding of their capacity to think rationally (which is not that flattering I should mention).
@True Muslim Paki: "This serves as Insurance for India against Terror Attacks from Pakistan which is not acceptable to any Pakistani".
So are you saying that Pakistanis want to preserve their right to plan and execute terror attacks in India? Interesting. At least you are upfront about wat you want to do. Most of your fellow countrymen do not openly say they support terror attacks in India and in fact say India falsely blames Pakistanis.
@Truth Seeker:
Indian corporate will definitely explore to invest in Pakistan. But first Pakistan govt. should permit FDI from India ( reciprocate the Indian gesture)
People here are forgetting that Pakistani businessmen don't have to start industries in India according to his agreement. They probably will simply invest in Indian stock market since it is a bigger, safer, better regulated, rapidly growing and more stable market compared to Pakistan's.
I think this is a move by Pakistani rich people to park money in India since they are not sure about the safety and returns on their investments in Pakistan. I do agree with the posters here that there isn't any benefit for Pakistan since Pakistani capital will flee Pakistan.
@gp65:
"Pakistan has not even given MFN to India (it is given in concept but actual implementation is postponed to December 2012 wereas India had given this in 1996). So the fact that India unilaterally gives concessions to Pakistan is not a new thing."
Currently India exports US$ 3.2 billion worth of goods to Pakistan (and another US$ 4 billion via U.A.E.) and imports only US$ 0.40 billion worth of goods from Pakistan. What is the use of giving this so called MFN status. Thanks but no thanks. We don't need unasked concessions especially if they practically mean nothing.
@unbeliever: you can keep Veena Malik in India for good. We don't consider her a Muslim & a Pakistani anyway. & don't keep begging for investments from us. We already donated you Malik. now keep the change!
Will Ajmal Kasab be the Mumbai Office Head?
All this is fine and good, but please, no more Kargils or Mumbais.
We can't live isolated. Pakistan needs a strong economy. We must have very good relations with our all neighboring countries including India. This is in the very best interest of our country. For Pakistan the fanatics and militants are more serous threat than India. It is a harsh reality. Let us love humanity and peace. Let us love our neighbors. They will start loving us in return.
@Ravish:First of al while the benefits of inward FDI are well understood, India still prevents inward FDI in some sectors (e.g. mutibrand retail) and from some countries (Pakistan until this decision came through) based on an overall cost benefit tradeoff. So the fact that FDI was not alowed in the past and will be allowed in the future is a concession to Pakistan. Pakistani businessmen now have one additional option to invest which they did not have before. Secondly you seem to think that oubound FDI is bad and that is why you feel this decision could hurt Pakistan. Your thought process is also the thought process that Indian poolicymakers had in late 1990s and early 2000s and hence it discouraged outbound FDI (From Indian businesses to other contries). But now it sees it differently. When Tatas own companies in UK, when Reliance owns companies in US etc., it expands their market and influence with decisionmakers in those countries. It is for this reason that your stated risks are probably not the disadvantage for Pakistan that you think they are.
@alicia, syed, utkarash & other fellow Indians: Yes. Am muslim and have a green passport & a proud Pakistani. So i put my name. Now, coming to your comments, let me justify. Indian Rupee is in a free fall, just like your stock markets which is why to contain it, you need Foreign currency & which is why you need us. Also, t
row our Rich Politicians and Generals put FDI in your country, & then theres a terror attack by Pakistani Militants, then you`ll block the money. This serves as Insurance for India against Terror Attacks from Pakistan which is not acceptable to any Pakistani. Also, why should we invest in your country and create jobs there, when we ourselves need investment in power and other sectors? Its a big conspiracy against innocent Pakistanis & am sure Imran Khan will take it up.@DKaimkhani: This rule does not allow Pakistans to invest in stock exchange as you are implying. This rule allows Paistanis to invest in Indian business/industry. Again it simply allows, it does not mean Pakistanis should do it if they do not feel it benefits them.
This should work both ways and not one way. Also if government bureaucracy is involved for processing this business it would most probably die its own death.
@Truth Seeker: "Thanks but no thanks. We need that investment in our own country.
It is not like some favor you are extending to Pakistan, rather asking for one".
It is not a favor we are asking for. In the past, Pakistanis could not invest in India now they can if they wish to. They don't have to.. This is something asked by your commerce minister, so definitely no favour to India by Pakistan here. OfcourseI also do not elieve that it is being favor being done by india. Indian government makes decisions in Indian national interest not based on emotion. It is however a confidence building measure because it reflects a greater degree of trust in Pakistan than before.
@Hadi Ansari: "It’s a good beginning but discriminating on two counts atleast.First one is that only Pakistanis would be allowed direct investment and the second one is rather more important than the first one ie visas to general public on both side of the divide.Unless we have people to people contact at the grass route with least restriction we will not achieve what we have conceived ie peace peace and peace at all level"
Pakistan has not even given MFN to India (it is given in concept but actual implementation is postponed to December 2012 wereas India had given this in 1996). So the fact that India unilaterally gives concessions to Pakistan is not a new thing. In any event, at this time even if Pakistan does allow indians to invest in FDI, I am not sure any Indians would based on security conditions as well as load shedding situation there. No-one else from the word is sending fresh FDI. The only FDI Pakistan is currently getting is where MNCs are reinvesting profits in Pakistan instead of repatriating them. Grass route visas are unlikely to be simplified at this time given the history of trying to push jihadis into India. This is something that was seen as a legitimate part of foreign policy. Even now DPC people talk about jihad against India openly in rallies. So it only makes sense that India would be careful about who they let in. Some years would have to pass without any terro incidents in India that can be traced back to Pakistan before Indian government would be comfortable with this.MY DEAR PAKISTANI BROTHERS YOU HAVE OVERLOOKED THE MOST IMPORTANT NEWS OF THE MONTH:
it's about YOUR ANd OUR favorite actress veena malik:
the channel on which she was going to marry man of her dreams has closed it's operations from today. that means it's shut.
so enjoy, as she is not going to marry in india. pakistani guys can still dream about her.
@hamza khan.
You are not even providing me a proper rebuttal, not to mention your reply is full of typos and grammatical errors. A bit ironic for someone calling my reply stupid.
The point you are trying to make is on a completely different tangent to what I am trying to convey.
@Ahmed: DO U/KNOW HOW MANY PAKISTANI WANT TO INVEST IN INDIA?
Im all for peace but this specific issue direct investment is not good for pakistan's economy the only few investors we have left here in pakistan will not invest in Indian market this means the tiny bit stock exchange we have here people will now invest in Indian Stock Exchange will reseult in total collapse of Karachi stock Exchange Trade is good but i dont know about direct investment
@curious: Yeah?? Going as per your lame excuse then mammoth conglomerates such as NY Life (which incidentally exited India today after selling its stake for thrice its initial investment), Vodafone, Nokia, Starbucks, Walmart etc would prefer to have its funds blocked? Right? Yeah... just as I thought and I am Elvis Presley! Grow up!
Its a master stroke by Manmohan Singh....Allowing FDI is a sure shot road to peace....few billion dollars into India by Pakistani companies and few billion dollars into Pakistan by Indian companies, and the governments will be forced to say good bye to war mongering...
@Ravish:
thats the stupidest thing i've read in a long time. FDI is made by all sorts of businessed, mid size and larger. those people benefit and pakistans economy benefits equally if not more than indias.
I feel India is giving too much leaverage to Pakistan but hardly getting anything in return.
@curious: "Yes they will allow anyone to invest in India but it is very hard to get your money back in India and they don’t pay"
Until now Pakistan was one country that was not allowed to invest in India - so this is a change. I am not sure what you mean by "it is hard to get your money back in India" More than $40 billion of FDI comes to India every year, so obviously all those people think that there is ahcance to get good returns. .
@Faesal "Bad news for the indians here".
Not sure you understood the news. India has made this decision. It is not some decision taken by a 3rd country against India. So if India thought t was bad fro india, this decision would not have been made.
@Ahmed: "I don’t see any positive point in this".
Pakistani businessmen have one more option than they did before. BEfore they could not invest in India, now tey can. If they see opportunities that they feel are beneficial to them they will invest and it will be good for them. If they do not see opportunities there is no requirement that they invest. In other words therei is a potential upside and no downside.
@Truth Seeker:
coz pakistan doesnt allow investment from india......secondly...if u need that investment in ur country...make ur country look profitable....
@ All Indian bloc:
Thanks but no thanks. We need that investment in our own country.
It is not like some favor you are extending to Pakistan, rather asking for one. Why don't you guys start investing in Pakistan?
Good to see some sanity prevailing
This is going to help both countries. Pakistanis can create products that they have not been able to create in their own country because of power shortages and other buearucratic problems. These products will be created far cheaper because Indian blue collar labor is still very cheap when compared with Pakistan. After products have been created, they can be sold for cheap in Pakistan because of cheap labor in India, not to mention, those products will also be sold in India.
My math looks great!!!!!!!!!!! But will this happen and help all of us prosper? May be not, these Mullahs will try to crash the party....
Pakistan should allow the Indian firms to invest in Pakistan especially in the coal sector. The Indian are hungry for coal for energy purposes.
Nice Initiative Pakistan India true friendship Need For Oppressed Peoples Of Indo Pak !
Our elite's hard 'cheated' money should be invested in pakistan. I am forecasting a mass migration of pakistani textile manufactures to across the border in india (punjab,rajstnan,gujrat/sindh). 24/7 energy supply to their factory, not too far from their current pakistani manufacturing location, no frequent absence of workforce due to strikes, US flags and tyre burning.the 'every thing will be okey in 90 days' jalsas and dharanas. sectarian/ethnic killing, terrorist attacks etc.
In which sector Pakistani investor would invest is question. There is intense competition in the market, land and labor very expensive compared to Pakistan. So, only business with advance cutting edge technology or business model will survive. Further, the management environment in India is almost professionalized even in family owned companies with executives wielding full power. Hence, other than few nice restaurants and retail textile,garment show rooms I do not see any major sector attracting FDI from Pakistan into India.
@True Muslim Paki....you are not serious or are you? If China wont support you against India you will support Uighurs? India needs Pakistan to save its economy? I hope you are being sarcastic!! If this goes forward it will "Friend with benifits"!!
@True muslim paki India's losing FIIs...and it needs to get them from Pakistan now?
It's strange how people's minds work.
With a capacity to handle about 600 trucks a day, means Amritsar will be more polluted and traffic will be more congested. Believe me my city has no infrastructure to handle this amount of traffic on daily basis.
It's a good beginning but discriminating on two counts atleast.First one is that only Pakistanis would be allowed direct investment and the second one is rather more important than the first one ie visas to general public on both side of the divide.Unless we have people to people contact at the grass route with least restriction we will not achieve what we have conceived ie peace peace and peace at all level.
@True Muslim Paki
First you're mixing FII with FDI which are two different things. FDI from Pakistan will not help Indian stock market in the short term.
Second, Indian stock market is one of the best performing stock markets this year.
Third, corporates are not silly jingoists. They sign pacts which they feel profitable.
Another roll of dice by India for peace. Lets see what happens this time... hope for the best !
finally something good done by the ppp's govt
Trade liberalisation finally! both countries have so much to gain with less restrictions on trade. it good to hear something good being done by the ppp's govt
Its anathor unilateral gesture by India without any commitment to reciprocate by Pakistan. However, I agree with this particular step to allow FDI by Pakistanis.
Indians dont have money and all FII are pulling out money, so their stock market going down. Now, they want Pakistan to rescue their market, but they are showing this as if they are doing a favour to Pakistan. If we send money, they become more prosperous by means of job creation etc. So, its definitely a conspiracy against Pakistan. Imran Khan should immediately condemn this. We should also warn china not go with investments into india or it will cost our china our friendship. http://www.reuters.com/article/2012/04/13/china-power-india-idUSL3E8FD7QH20120413
China is also dependent on Pakistan where its crushing uighur muslims & Pakistan will support Uighurs if they wont stop.
Great work by both govts
@Blunt!: @dude: @Arindom:
You must love mullahs and hafiz saeed too much? Any chance of secret love affection since childhood?
@Ahmed: No one is forcing anybody to do anything. I agree that this is not likely to be very big for India. However, FDI can also be in buying into an existing company, so there is no guarantee of job creation, only of investment. Further, it is not the cash-strapped Govt of Pakistan that is going to invest in India, but Pakistani businessmen, who can look at some level of forward/ backward integration in the value chain.
I don't see any positive thing in it. Indian investor wouldn't invest here, and it also discourage local investor to invest in Country.
It is certainly a Giant Leap Forward in CBMs. Pakistan must take its full advantage. We on the other hand must not overlook the glass ceilings that may put the agreement on paper only.
This will benefit India more as it will provide Pakistani Businessmen and Investors an alternate location to invest which is a lot more safer, stable electricity/energy supply, far more investment friendly bureaucracy, and higher returns. On top of that this will decrease the potential domestic investment happening in Pakistan, diverting it towards India. Further returns will also have a higher probability of being reinvested back into the Indian economy.
The Indian government I feel is locking the Pakistani elite into the Indian economy, thereby broadly increasing leverage on them. I don't know why nobody in Pakistan is speaking about such repercussions on their country.
Great news for Pakistan. Now companies in Pakistan can invest in India. Since Pakistan does not want Indian investment India will restrict itself to taking Pakistan's money.
Another step towards peace. This is good. It's better than getting into arms race. I'd love to see some Pakistani talent coming into IPL.
Pakistan economy increase.
This will help pakistan.
..all fine as long as they don't invest in Mullahs
....and when will Pakistan open up to FDI from India/NRIs etc?
Both India and Pakistan have to enter into new Avoidance of Double Taxation treaties as the one available was entered in 1948 and it does not respond to present times and conditions. Without new treaty, no investment would be possible
Yes they will allow anyone to invest in India but it is very hard to get your money back in India and they don't pay.
Do we have money to invest in India...i mean seriously. Also we need dollars to invest in India..we've just $17 billion in reserve. Also since it's FDI and not FII, it's gonna create jobs in India. I don't see any positive point in this.
Pakistan MUST take this olive branch presented by India. It is NOT in our interest to arms race each other into bankruptcy. Let us herald the dawn of a new era together and walk past the old differences and mistrust. PLEASE! For all our sakes.
now Hafiz Saeed can open is office in New Delhi.
Ok, but lets be clear.
We want foriegn direct investments from genuine businessmen & NOT from the likes of hafiz saeed!
Bad news for the indians here.