The Indian government has lifted a ban on foreign investment from Pakistan as part of efforts to normalise trade between the two countries.

The move will allow foreign investment from Pakistan and permit Pakistani citizens and businesses to make investments in India.

The two neighbouring countries are working to remove trade and investment barriers by the end of 2012, after Pakistan pledged to grant Most Favoured Nation (MFN) status to India and the Indian side supported free access of Pakistani products to the European Union (EU).

Officials at the All Pakistan Textile Mills Association (APTMA) told just-style that Pakistani entrepreneurs are keenly looking forward for the removal of non-tariff barriers against Pakistani exports to India.

Pakistan and India are cotton-rich countries, accounting for around 30% of world cotton production, and have a combined population of more than 1bn.

But official trade between them stood at just US$2.7bn in 2010-11. Pakistan's commerce ministry hopes this will rise to US$7bn in two years, after trade has been opened up.