South Asia Free Trade Agreement will come into effect from January 2006, Lok Sabha was informed on Tuesday.
"This is important for India politically and in terms of trade," Union Commerce and Industry Minister Kamal Nath said in reply to a question.
As part of SAFTA, he said various sea routes could be explored to enhance trade with Pakistan.
Nath said there were some hindrances in implementation of SAFTA but in the last fortnight very positive developments had taken place and "it is coming into effect from January 1".
Regarding steps taken to boost bilateral trade with Pakistan, he said India and Pakistan had set up a Joint Study Group at the level of commerce secretaries to adopt strategy for enhancing trade between the two countries.
The trade liberalisation under SAFTA, to which both India and Pakistan are signatories, would be applicable to all items except those in the sensitive (negative) list.
India's sensitive list has 884 items and Pakistan's 1183, the minister said.
Replying to another question with regard to the entry of foreign players like Posco and Vedanta in Orissa, Nath said the United Progressive Allaince government was supportive of industrialisation and foreign direct investment and there might be some local issues, which have to be resolved by the state government.
