4 August, 2012
The Government of India (“GoI”) has permitted investments into India by citizens of and entities incorporated in Pakistan. The decision follows the proposal sent by the Ministry of Commerce and Industry to the Ministry of Finance on February 16, 2012.
In terms of the FDI Policy, investments from Pakistan were the only ones expressly prohibited in India, owing to concerns of the GoI over national security.
The policy revision effected on August 1, 2012 now permits citizens of Pakistan and entities incorporated in Pakistan to invest in all sectors/activities other than defense, space and atomic energy. All investments would however be subject to prior approval of the GoI, as was expected and reported in our newsletter of February 21, 2012.
The policy revision can be viewed more as a confidence building measure between the two nations, rather than immediately throwing open serious investment opportunities. The political uncertainty and legacy issues still overshadow the minds of entrepreneurs and investors on both sides of the border. Cross border investments would however be the way forward towards improving the ties, as economic factors would assume increasing importance over other issues.
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