NEW DELHI: India has decided to allow foreign direct investment from Pakistan, India's trade minister said on Friday, hours before the two countries were due to open a trading post on the Wagah 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.



Sharma said, "Procedural requirements (for FDI from Pakistan) are underway. It will be notified soon." Besides, talks are underway to allow banks from both the countries to open branches in each other's territory, he said, adding, "RBI and State Bank of Pakistan are in favour of opening branches..." Fahim said, "there has been progress in allowing banking services from both sides. In-principle we have agreed."



On multiple entry business visas, he said, "There will be a formal signing of agreement soon. It will be for one year initially."Despite thousands of years of shared history and culture and a combined population of 1.4 billion people, cross-border trade remains paltry.



Sharma did not elaborate on the mechanics of the step, except to say "procedural requirements" were under discussion. The trade minister also said a deal to ease visa curbs on business travel between the South Asian neighbours would be ready "soon".



Under the 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 PPP-led government 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 before moving on to more intractable problems such as the disputed region of Kashmir. Sharma also said an agreement to relax restrictions on visas for Pakistani businessmen was almost ready.



Later Friday, Sharma and the Pakistani Trade Minister Amin Fahim, opened an expanded border trade terminal at Wagha. With a capacity to handle about 600 trucks a day, the border crossing is expected to help bring trade to $8 billion annually from the current level of $2.6 billion, Indian industry chamber said in a study published this week.



Pakistani trade minister, Makhdoom Amin Fahim, was in New Delhi for the largest Pakistani commercial fair ever held on Indian soil, showcasing "contemporary" Pakistan's top jewellery, furniture and clothes designers. Fahim called the opening of the trading post at the Attari-Wagha crossing between Lahore in Pakistan and the northern Indian city of Amritsar a "milestone."







