In a move that will strengthen commercial ties between India and Pakistan, Reserve Bank of India has permitted foreign direct investment from Pakistan into India which had been banned hitherto.
In a notification, the central bank said “a person who is a citizen of Pakistan or an entity incorporated in Pakistan may, with the prior approval of the Foreign Investment Promotion Board of the Government of India, purchase shares and convertible debentures of an Indian company under Foreign Direct Investment Scheme”. The central bank added that this notification overrides the earlier regulation under the foreign exchange management act which bars citizens of Pakistan or any entity incorporated outside India in Pakistan from purchasing shares or bonds of an Indian company under the foreign direct investment scheme. The ban will however continue in sensitive industries such as those engage in sectors / activities pertaining to defence, space and atomic energy and sectors prohibited for foreign investment under the regulations.
The decision to allow investments from Pakistan was announced by commerce minister Anand Sharma in June who said that a in-principle decision had been taken to open up FDI doors to allow businesses from the neighbouring country to set up shop here. The announcement took place following a meeting between Sharma and his Pakistani counterpart Makhdoom Amin Fahim in Delhi. RBI’s notification follows the clearance by the Department of Industrial Policy and Promotion (DIPP) which cleared the proposal a couple of months back. Following this the finance ministry has approved the proposal and made changes to the respective regulations under the foreign exchange management act.
