India may allow selective foreign direct investment from Pakistan, if the political situation in the neighbouring country improves. At the moment, both the countries do not allow FDI flows between each other.
"I hope that once the political situation in Pakistan eases, we may look at foreign investments from Pakistan on a case-by-case basis and taking into consideration security issues," Minister of State for Commerce and Industry Jairam Ramesh said on the sidelines of a seminar organised by the Research and Information System for Developing Countries.
Earlier, calling for easing investments norms by India for its neighbours, Ramesh said: "Investment will be the main locomotive for the South Asian Free Trade Agreement. In one way, investments will help neighbouring countries like Pakistan, Sri Lanka and Nepal to address the large trade deficit that they have with India."
India had allowed FDI from Bangladesh on a case-by-case basis in December 2007 by amending the Foreign Exchange Management Regulations, 2007.
India and Pakistan are set to begin "area-specific" border trade through two points in the Line of Control in Jammu and Kashmir from next month. If India allows foreign investments from Pakistan, it can also expect a similar move form the neighbouring country. "Some Indian companies, especially in the information technology sector, are interested in investing in Pakistan," Ramesh added.
The minister also said India and South-east Asian economic bloc Asean would sign the ambitious free trade agreement on December 18. The deal, involving zero duty trade of goods, is likely to boost two-way trade between India and Asean to $48 billion in 2008-09 from nearly $38.3 billion seen in 2007-08. Both the sides had successfully sealed their negotiations in August this year.
The India-Asean deal is likely to be implemented from January 1, 2009.
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