FDI in India and Pakistan: Potential Sectors for Bilateral Investment

Abstract

Both India and Pakistan follow a liberal and open economic policy. Almost all the sectors of these two economies are open for foreign investment. Both of them have also been able to attract a substantial volume of foreign investment from various corners of the world in almost all the sectors of the economy. During the last decade, many companies from both nations have emerged that have successfully invested in foreign markets. But, to date, there exists no bilateral direct investment between these two developing neighbouring economies. In this connection, the present study tries to explore the trend of the foreign direct investment inflows and outflows from India and Pakistan. The study also tries to explore the potential sector in both economies where either side can invest. Applying a robust three-stage methodology, the study finds that sectors such as power generation, healthcare, pharmaceutical and e-commerce are some of the vital sectors in Pakistan where Indians can invest. Similarly, banking and insurance, cement, and textiles are the prominent sectors in India where Pakistani companies can invest and collaborate.