"The Department of Industrial Policy and Promotion (DIPP) has sent a proposal to Finance Ministry for changes in FEMA to allow FDI from Pakistan," a top official said.
The government, the official added, could change the Foreign Exchange Management Act (FEMA) regulations to allow FDI from Pakistan by "simply issuing a notification."
India has been taking steps to improve trade relations with Pakistan. Commerce, Industry and Textiles Minister Anand Sharma is currently visiting Pakistan along with a big industry delegation. Sharma is the first Indian Commerce Minister to visit Pakistan.
In order to address the security concerns over investments from Pakistan, the official said, the FDI proposals from the neighbouring country can be routed through the Foreign Investment Promotion Board (FIPB) which is headed by Economic Affairs Secretary in the Finance Ministry.
As per the present FDI policy, a non-resident entity, other than a citizen of Pakistan or an entity incorporated in there, can invest in India. The government had earlier allowed investments from Bangladesh under the FIPB route.