"The Government of India has reviewed the policy...anddecided to permit a citizen of Pakistan or an entity incorporated in Pakistanto make investments in India," the Commerce and Industry Ministry said ina press note.
However, strategic sectors of defence, space and atomicenergy have been kept out of foreign direct investment (FDI) from Pakistan, itsaid.
Also, the FDI proposals from the neighbouring country wouldneed clearance from the Foreign Investment Promotion Board (FIPB).
Hailing the decision, the Indian industry said thatPakistani businessmen can explore sectors like cement, textiles and sports forinvestments in the country.
"It is a great decision...Now Pakistan should alsoimplement the MFN status to India," Ficci Secretary General Rajiv Kumarsaid.
SAARC Chamber of Commerce & Industry President VikramjitSingh Sahney termed the decision as one of the strongest confidence buildingmeasures to improve bilateral relations.
"Pakistan should also take similar steps and allowIndian businessmen to invest in their country," CII Director GeneralChandrajeet Banerjee said.
Although Pakistan had notified granting the MFN status toIndia in March this year, it is yet to implement it fully, amidst reports ofpressure from hardliners.
However, Pakistan had partially liberalised its trade regimewith India in March when it shifted from positive list rules tonegative-meaning barring 1209 items Islamabad would allow import of all otherIndian goods.
Analysts feel that Wednesday's decision would help thePakistan government to convince the MFN opponents about its trade bargains withIndia.
India had granted the MFN status to Pakistan way back in1996 which means that Islamabad will give treatment to Indian imports at parwith its other trading partners.
