DIPP has sent a proposal to the Ministry of Finance, on February 16, 2012, to relax the current FDI norms to allow FDI from Pakistan. In terms of the present FDI norms, a non-resident entity other than a citizen of Pakistan or an entity incorporated in Pakistan can invest in India. Pakistan is the only country expressly debarred from investing into India. An individual or an entity incorporated in Bangladesh can invest only under the FIPB approval route. Although Pakistan allows FDI from India, the Government of India has always had security concerns in reciprocating Pakistan’s stance.
The proposal is at infancy level as of now and is undergoing a lot of deliberations between the various government departments. At subsequent stages, talks will commence between the India-Pakistan CEO’s Forum with government representation to take it forward and decide on the sectors where the investments may be allowed and the sectoral caps thereof.
Although FDI may be allowed from Pakistan, with concerns of national security still lingering, the Government would most likely avoid investments under the automatic route, that is, the FDI shall be routed through the FIPB approval route.