New FEMA rules may allow Pakistani investment in India

NEW DELHI: In a major step forward towards normalizing business ties, Indian government plans to bring changes in Foreign Exchange Management Act (FEMA) to allow investments from Pakistan, a senior government official said.

"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 manaoramaonline.com. Pakistan is the only country from where investment is not allowed in India.

An Indian Commerce & Industry ministry official, who does not want to be named, said investments from Pakistan could be allowed by a change in the FEMA regulations.

"It can be done by simply issuing a notification," he was further quoted as saying. All foreign exchange transactions in India are governed by FEMA regulation, which came into force in 2000. This is a civil legislation and Reserve

Bank of India can make changes to allow Pakistani investment after taking approval from Finance ministry.

Asked whether investments would be sector-specific, 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, official said, once FEMA regulation is changed, all foreign direct investment (FDI) proposals from Pakistan would have to be cleared through Foreign Investment Promotion Board, a department of Finance ministry. Bilateral trade between India and Pakistan was $2.7 billion in 2010-11, but there is no two-way investment so far.

Sharma said two countries were mulling an agreement to promote and protect cross border investments.

India & Pakistan, whose relations have been marred for decades by a host of issues, including Kashmir and terrorism, have announced several measures in recent months to normalize business and economic ties.

The two countries agreed to normalize visa regimes and move from "positive list" to a short "negative list" trade regime by end of this month, a major step forward to ease trade norms and facilitate movements of people.

Business leaders are also enthused by recent increase in ties between two countries. "It's a very good beginning. Things should move step by step," said Sudhir Jalan, co-chairman Kolkata-based Rieter India

Private Ltd. President Federation of Indian Chambers of Commerce & Industry FICCI R.V. Kanoria said businesses of both countries would be happy to invest in cross-border business if proper policies were put in place.

Copyright PPI (Pakistan Press International), 2012