More than 600 Pakistani businessmen are in New Delhi this week

INDIA has decided to allow foreign direct investment from Pakistan, India’s trade minister said today, hours before the two countries were due to open a trading post on the border in the latest sign of thawing economic ties.

Liberalising heavily restricted trade and investment flows is now the driver of peace efforts between the neighbours.

“India has taken an in-principle decision, as a part of the process to deepen our economic engagement, to allow foreign direct investments from Pakistan in India,” said trade minister Anand Sharma at a news conference with his Pakistani counterpart.

Under current rules, Pakistani citizens cannot directly invest in India. Investment flows are unlikely to surge, but the move will go some way to addressing concerns by Pakistani businessmen that India places too many restrictions on them.

More than 600 Pakistani businesses are in New Delhi this week at a trade fair to promote their products to the Indian market.

In the face of some domestic opposition, the government of Pakistan President Asif Ali Zardari last November vowed to grant India most favoured nation status, which ends restrictions that require most products to move via a third country.

The move was hailed by India and the two countries are now focused on resolving economic issues.

Sharma also said an agreement to relax restrictions on visas for Pakistani businessmen was almost ready.

India’s trade minister Sharma and the Pakistani trade minister, Makhdoom Amin Fahim, will open an expanded border trade terminal at Wagah, between Lahore and Amritsar later in the day.

With a capacity to handle about 600 trucks a day, the border crossing is expected to help bring trade to $8bn (£5.02bn) annually from the current level of $2.6bn (£1.63bn), Indian industry chamber ASSOCHAM said in a study published this week.
 

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