Indian Government plans to strike off Pakistan from negative list and allow FDI, trade talks in coming months

New Delhi: Pakistani companies may soon be able to invest in India as the government plans to strike off the country from a negative list that debarred investments from across the border. The symbolic move is not likely to yield fat investments into the country, but offer a political dividend to warm the often-frosty ties between two neighbours, Economic Times ET newspaper reported on Monday.

“When we can allow investments from China, there is no reason to block Pakistan,” a senior official told ET. “We can regulate the investments that come.” The issue will top agenda of talks when Pakistan Joint Secretary of Commerce Rubina Ather visits Delhi this week. Ather will be discussing blueprint signed by commerce secretaries of India and Pakistan early this year to promote trade and investment. The meeting is also likely to take up Pakistan’s offer of extending the Most Favoured Nation, or MFN, status to India.

Pakistan is only entry in the negative list under the Foreign Exchange Management Act. The government had deleted Sri Lanka in 2006 and Bangladesh in 2007 from the list. Indian Finance and Commerce Ministries are now examining feasibility of removing Pakistan from the list.

Pakistan may also allow investments from India on a case-by-case basis. “Both countries realize that opening investments will not necessarily result in a flood of investments,” the official quoted earlier said. “Businesses will only invest when they are very sure that their money is safe.” The blueprint signed by commerce secretaries of two countries seeks to allow non-discriminatory trade with India by extending the MFN status, permitting trade of petroleum products and electricity, and removal of non-tariff barriers by India.

During Ather’s visit, two sides will discuss steps taken by Pakistan to give MFN status to India by moving to a system of trading through a negative list of goods. At present, Pakistan allows India to export only a limited number of items included in positive list. Once it moves to a negative list, India can export all commodities except those mentioned in negative list.

“Pakistan had sought inputs from its industry on items that should be included in negative list. This will be an important area of discussion for us,” official said. Ather is expected to hand out a list of non-tariff barriers imposed by India in the form of stringent quality norms that restrict imports from the country.

“We will examine the list and remove as many restrictions as is reasonable and possible,” official said, adding India was genuine in its endeavour to remove unnecessary obstacles to trade. At present, trade between India and Pakistan is pegged at about $2 billion. Trade between two routed through third countries is estimated at another $2 billion. A study by Delhi-based Indian Council for Research on International Economic Relations estimates the trade potential between India and Pakistan at $14.3 billion, with India exporting about $11 billion worth of goods to Pakistan and importing $3 billion.

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