India has decided in principle to allow foreign direct investment from Pakistan, as part of the road map to enhance economic engagement, a development that is expected to boost bilateral trade.

“As part of the initiatives to promote liberal trade, India has in principle agreed to FDI from Pakistan,” Commerce and Industry Minister Anand Sharma said on Friday, after meeting Pakistan Commerce Minister Makhdoom Amin Fahim here.

Mr. Sharma said the procedures, and the requirements, for allowing FDI were being formulated, and would soon be notified.

Both countries have also agreed in principle to allow opening of bank branches to guarantee smooth trade. This is the upshot of several rounds of talks between the Reserve Bank of India (RBI) and the State Bank of Pakistan.

“Both the RBI and the State Bank of Pakistan are in favour of opening up branches on both sides of the border,” Mr. Sharma said.

On this count, Mr. Fahim said, both sides were on the same page.

Pro-active steps

Encouraged by the pro-active steps taken by Pakistan, India would carry out a review of 30 per cent of the ‘sensitive list' in the next four months as a confidence-building measure, Mr. Sharma said.

Pakistani banks and businesses are keen on setting up shop in India, and the decision could pave the way for their entry into the country.

Business council

Mr. Sharma also announced that an India-Pakistan business council would be set up soon. It would be co-chaired by both countries.

Mr. Fahim said talks were being held for cooperation in the textiles trade.

“We have also decided to begin negotiations in the hospitality, education and tourism sectors, and experts groups would be constituted to work out the modalities for talks,” he said.

Later, Mr. Sharma and Mr. Fahim left for the Attari-Wagah border, near Amritsar, to inaugurate the second Integrated Check Post, which will facilitate a smooth flow of road traffic and give traders and people crossing the border upgraded and modern infrastructure.

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