Report

Appendix 8
Intra SAARC FDI Collaborations
India is one of the SAARC countries where overseas
investment policy has been substantially liberalized in
recent years. Indian companies can invest up to US$
100 million (US$ 150 million SAARC countries,
excluding Pakistan and Myanmar and up to Rs 7000
million by way of rupee investments in Nepal and
Bhutan) in a year without approval of RBI or GoI
provided the overseas investment is not real estateoriented.
Funding of such investments can be out of
balances held in exchange earners foreign currency
account (EEFC) of the Indian company or 100% of
ADR/GDR proceeds or withdrawal of foreign exchange
from an authorised dealers in India up to 200% of the
not worth of the Indian company.
India’s investment in South Asian countries was
US$ 164.53 million during the period 1996–2002,
being no more than a little over 2% of its overseas
world investment. Nepal was the most important
destination of Indian investment followed by Sri Lanka.
Since 2002 however Sri Lanka has overtaken Nepal
as India’s largest investment destination in South Asia. 1
By virtue of its proximity and the Trade Treaty
with India, close economic linkages between India and
Nepal have manifested themselves, inter alia, through
Indian investment and joint ventures in Nepal.
Government of India has established a special ‘Nepal
Window’ to facilitate approvals for Indian investment
in Nepal and the limit for ‘fast track’ approval by
Reserve Bank of India for investments in Nepal has
been raised in July 2000 to Rs 350 crores (Indian
currency). In 2000 there were over 265 approved Indian
joint ventures in Nepal of which over 100 are operational,
with a cumulative total Indian investment amounting
to between 36–40% of the total FDI in Nepal. In
2004 there were 114 operational Indian joint ventures
in Nepal with authorised capital of NR 14.33 billion.
Of these, 22 joint ventures had authorised capital of
NR 100 million and above. [See Table A8.1 (a)].
There have not been any specific investments in
Pakistan through India. However, of late, some signs
of possible investment are visible. Reliance Industries
is in advanced negotiations to acquire the petrochemical
business of ICI-Pakistan close to US$ 300
million. ICI Pakistan which comprises of 5 Pakistan
businesses of polyester, soda ash, chemicals, life sciences
and paints is one of the largest quoted companies on
Karachi, Lahore and Islamabad stock exchanges. The
$2.2 billion Indian software services major Tata
Consultancy Services (TCS) has taken the first steps to
set up a base in Pakistan. If it succeeds, TCS will become
the first Indian IT Company to the market. Dabur India
will soon have a foothold on Pakistan soil for it will
be setting up a manufacturing joint venture with
Pakistani firm by the end of this year, Ayurvedic
products will be the fulcrums of their joint ventures in
Pakistan. Pakistan Government has given them note
to set up the subsidiary marketing venture in Pakistan,
which would make their products available to
consumers at cheaper rate. [See Table A8.1 (b)]. Table
A8.1 (a), (b) and (c) list some of the successful examples
of intra SAARC FDI and technical collaborations in
the region.
1
Ananya Raihan (2006) ‘Regional Economic Cooperation: Investments and Joint Projects’, http://www.southasianmedia.net/
conference/conference_envisioning/vision_goup_5.htm