Finance Ministry to decide on allowing Pakistani investments

ISLAMABAD: India has moved a step closer to lifting the ban on investments from Pakistan. The industry department has referred the issue to the finance ministry, which is in final consultations with the home ministry on the matter, a senior official told ET.

"The matter is now resting with the finance ministry which will decide whether Pakistan is to be dropped from the FEMA negative list. It is now their call," the official said on condition of anonymity.

Commerce minister Anand Sharma, however, refrained from making any promises on the subject during his goodwill bilateral visit to the country.

Pakistan is the only country in the negative list under the Foreign Exchange Management Act (FEMA). The government had deleted Sri Lanka in 2006 and Bangladesh in 2007 from the list.

Pakistan allows investments from India and has been insisting that its neighbour, too, do the same as part of the recent efforts to strengthen bilateral commercial ties.

Indian investors are yet to make investments in Pakistan as they do not have much confidence in the business environment there. Similarly, no investments are expected to flow from Pakistan either.

"Lifting the ban on investments from Pakistan will just be a goodwill gesture. Trade has to increase first before an environment is created that would foster investments," the official said.

Pakistan promised to stick to the timeframe of ending the restrictive positive trade regime in February and giving India the elusive most favoured nation status by the end of the year in the bilateral meeting between commerce ministers from both sides. The joint statement, however, was silent on the issue of allowing investments from Pakistan.