MEA new guidelines about Pakistan regarding FDI and the ground realities

Masroor Ahmad


Masroor Ahmad

Indian policymakers leave no chance to undermine Pakistan out of rivalry with Muslims. The current regime of India takes all possible steps to harm or defame Pakistan even through symbolic initiatives which otherwise cast no impact on Pakistan considering it a potential barrier in its ambitions in the region and at the global front. While the new notification on Foreign Direct Investment (FDI) is aimed at streamlining investments from countries, which share land boundaries with India, the Ministry of External Affairs (MEA) of India suggested that no country, except Pakistan, is named in the document. The argument for revised guidelines was also based on the fact that Australia, Italy, Spain and EU have undertaken similar measures against foreign investments. However, it is evident that India is making such decisions under some unnecessary apprehensions.

India has more tense relations with China than Pakistan but because of economic dominance and huge Chinese investment in India the new Indian guidelines do not name China may be to prevent any vilification from the Chinese side.  India will engage with China to procure  rapid test kits, PPEs and ventilators to treat patients affected by Covid-19. The new guidelines of MEA charter out that investments from all countries sharing land boundaries with India has to come through government route. Whereas, a citizen of Pakistan or an entity incorporated in Pakistan can invest only under the government route. This decision is just to create an embarrassment for Pakistan, otherwise Pakistani business community has very little business interest in India in terms of investments.

The decision of MEA may not have much significance as Pakistan has already suspended bilateral trade relations in response to India’s move to end special status for Jammu and Kashmir and split it into two union territories.  India had also revoked Pakistan’s most favoured nation (MFN) status following the Pulwama attack that killed about 40 CRPF personnel imposing 200% duty on import of Pakistani goods. The trade balance between both the countries have been in favour of India and it was benefitting more than Pakistan due to its exports for which Pakistan has found alternate markets. This must be considered as a unilateral move and unilateral loss.

It has also been predicted that the new guidelines are a temporary measure which will be reviewed in post-Covid period. Among the apprehensions about these guidelines there are also Indian fears that Chinese investments can enter India through other countries with which India shares land boundary. China has a smart stake in India’s technology domain and Chinese Tech investors have put an estimated $4 billion into Indian startups. Just in five years 18 of India’s 30 unicorns are now Chinese-funded, according to a recent study by Mumbai-based think-tank Gateway House. Chinese smartphones such as Oppo and Xiaomi lead the Indian market with a large share. While the world is facing Covid-19 crisis and economic slump has ruined many economies Indian MEA is taking farcical decisions under national security considerations. Although Bangladesh shares a land boundary with India, the new policy does not treat it on a par with Pakistan. This is may be in recognition of the close relationship between the two countries, though Bangladesh has been raising the issue of restrictions imposed on citizens.

It may be interesting to note that neither Pakistan nor India is critically dependent on each other’s market, though the suspension of bilateral trade might, in the short term, affect the consumer welfare by increasing prices of a few products which otherwise will be imported from other far-flung markets. Pakistan’s exports to India include dried dates, cement, sugar, gypsum, sesame seed, leather, steel scrap, disodium carbonate and surgical instruments while there is little dependence of Pakistan’s exports on the Indian market. Similarly, the Indian exports to Pakistan include cotton, organic chemicals, cotton yarn, plastic articles, dyes and pigments, machinery, pharmaceutical products, iron, steel, tea and spices. Most of these products are industrial raw materials for which multiple global sources of supplies exist.

Before the normalization of trade relations with India, the Pakistani Government needs to ensure that local industries are capable of effectively countering the inflow of cheap products from India and provide assistance to exporters to increase export competitiveness. A formidable trade policy should be formulated to negotiate favorable terms of trade with India. Pakistani Government needs to learn from the China which though have intense relations with India over many issues but China tactfully has pursued its economic interests in relationship with India and we need to learn that the economic interests of the nations help normalize other disputes.

Both Pakistan and India have benefitted nothing out of conflicts since the independence, so it will be prudent to take confidence measures for meaningful dialogues. India being the largest country than Pakistan should be more generous, but unfortunately its attitude towards Pakistan is very hostile and aggressive. The trust deficit between both the countries spanning over many decades can be overcome through bilateral talks, people to people relations, trade and end of secret games or covert operations of intelligences agencies. According to the estimates of World Bank, the potential of Pak-India trade is $37 billion against the actual $2.3 billion that too is staggering under current circumstances. The recent Indian MEA guidelines is nothing but an exhibition of hatred against Pakistan, which otherwise is not depending on India in raising its economy. However, when the sanity prevails which must prevail, the people of both the countries will benefit from the trade potential as drawn by World Bank.