The Hindu Business Line : Ban on FDI from Bangladesh lifted

New Delhi, Jan. 3 India has lifted the ban on foreign direct investment (FDI) from Bangladesh, paving the way for investment flows between the two countries, which might help narrow down the huge trade deficit Dhaka currently suffers in its trade with New Delhi.

The Minister of State for Commerce, Mr Jairam Ramesh, who was spearheading the move to lift the ban, told Business Line here that he was thankful to the understanding displayed and significant efforts made by the Prime Minister, Dr. Manmohan Singh, and the External Affairs Minister, Mr Pranab Mukherjee.

Mr Ramesh said that the Reserve Bank of India has effected through Second Amendment to Foreign Exchange Management Regulations, 2007, changes in October 2007 providing permission to citizens of Bangladesh or an entity incorporated in Bangladesh to purchase shares and convertible debentures of an Indian company, with the prior approval of the Foreign Investment Promotion Board (FIPB), and not through automatic route.

The RBI has issued notice to this effect to authorised dealer banks in India on December 19 after the change was gazetted on November 14.

Mr Ramesh said that even as Indian industry has lined up $3 billion investment for Bangladesh in coal, power, steel and fertilisers, Bangladesh is also keen on investing in India’s paper, pharmaceuticals, textiles and food processing sectors.

In the absence of any positive signal for lifting the ban, these investment activities could not be brought to fruition and with India’s latest move to lift the ban, investment volume would increase, he hoped.

Mr Ramesh recalled his statement at the inauguration of India-Bangladesh Chamber of Commerce and Industry in Dhaka on July 22, 2007, that any blanket ban made no sense especially since Indian companies themselves seek to invest in Pakistan and Bangladesh.

He pointed out that when India began investing in Sri Lanka in recent years, the trade deficit which was 1:10 with India has come down to 1:5 now, and Sri Lanka has also started investing in the apparel industry in Bandrix Garment factory in Vishakhapatnam SEZ.