- Foreign investment from Pakistan requires government approval under new rules
- Investments from countries sharing land borders with India must follow government route
- Pakistani investments banned in defence, space, atomic energy, and prohibited sectors
The government tightened foreign investment rules for countries sharing land border with India, especially mandating specific provisions for Pakistan in a notification issued by the Ministry of Finance on Saturday, May 2.
According to the revised rules, any individual or an entity registered in Pakistan can invest in India only thorugh government route for investments. Notably, such investments will be allowed in sectors except defence, space, atomic energy and other areas where foreign investment is prohibited.
The amended rules said, "a citizen of Pakistan or an entity incorporated in Pakistan shall invest only under the Government route," and such investments will be allowed only in sectors "other than defence, space, atomic energy and such other sectors or activities prohibited for foreign investment."
In terms of countries sharing land border with India, investments shall be only made through the government route.
"An entity or a citizen of a country, which shares land border with India, or where the beneficial owner of an investment into India is a citizen of any such country, or where the beneficial ownership of an investment is vested in any such country, shall invest only under the Government route," the notification read.
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The government also mentioned that any changes of ownership in future will come under scrutiny. It said that "in the event of the transfer of ownership... resulting in the beneficial ownership falling within the restriction... such subsequent change... shall also require prior Government approval."
Notably, multilateral institutions will not fall under these restrictions, with the notification stating that "a Multilateral Bank or Fund... shall not be treated as an entity of a particular country."
The recent revision comes as the government on Saturday notified 100% Foreign Direct Investment (FDI) in insurance companies under the automatic route, allowing greater participation from foreign investors.
However, Life Insurance Corporation of India (LIC) will remain under a separate framework, with foreign investment capped at 20% under the automatic route.
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