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As a goodwill measure, India may allow investments from Pakistan into the country. Government sources said the Commerce Ministry has proposed to the Finance Ministry to exempt Pakistan from FEMA regulations.
This is being seen as a move to strengthen bilateral economic relations between the two countries. The issue was also discussed during the three-day trade talks that ended on February 15. However, the buck on the subject stops with the Finance Ministry.
The source said that this does not require an amendment to the Foreign Exchange Management Act (FEMA), but can be done by way of notification. Currently, Pakistan is the only country under this regulation.
Once the go-ahead comes, foreign direct investment (FDI) from Pakistan will be possible through the Foreign Investment Promotion Board (FIPB) route on case-to-case basis, the source added.
Asked whether the security issues would also be considered, the source said, the Home Ministry views are being taken into account. The Home Ministry’s main concern was about security.
On whether investments will be allowed through the automatic route, the source said, it will be based on the current mechanism, sector-specific and case-to-case basis by the FIPB. At present, the trade between India and Pakistan is tilted in favour of India.
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