Govt 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 the two neighbours.

"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 the agenda of talks when Pakistan Joint Secretary of Commerce Rubina Ather visits Delhi this week. Ather will be discussing the blueprint signed by commerce secretaries of India and Pakistan earlier 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 the 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.

The ministries of finance and commerce are now examining the feasibility of removing Pakistan from the list.

"There cannot be a better gesture in the realms of economic cooperation," said Ram Upendra Das, senior fellow at Delhi-based think-tank Research and Information System for Developing Countries (RIS). "There is a very strong case for it as there are consumption complementarities, production complementarities."

Pakistan may also allow investments from India on a case-by-case basis.

"Both countries realise 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 the 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, the 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 a positive list. Once it moves to a negative list, India can export all commodities except those mentioned in the negative list.

"Pakistan had sought inputs from its industry on the items that should be included in the negative list. This will be an important area of discussion for us," the 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," the 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 the 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.

Source : economictimes.indiatimes.com