Iran signals it's open for business, woos India Inc with easier FDI norms

Iran Economic Affairs Minister hints at DTAA, preferential trade, claims $24 bn FDI flowed into his country in 2 years

Iran has pitched itself as an untapped market with reformed foreign direct investment policies for Indian firms at a time Iran signals it's open for business, woos India Inc with easier FDI norms India is planning to allow investments into Iran through the Rupee.

"Iran is a stable and desirable market for meeting a number of basic and livelihood needs for Indian merchants and we have plans to further liberalise our FDI policy." Iranian Minister for Economic Affairs and Finance Masoud Karbasian said on Saturday, adding that the country has received $24 billion worth of investments over the past 2 years.

Investment ties between the nations have suddenly hit the spotlight during the ongoing three-day visit by Iranian President Hassan Rouhani to India. India is said to be mulling plans to allow its citizens to investment in Iran through the national currency the rupee in a bid to circumvent tough trade sanctions in place against financial transactions with the middle eastern nation. Currently, Indians can invest using the Rupee only in Bhutan and Nepal.

The matter is expected to be on the agenda of discussion on Saturday when Prime Minister Narendra Modi meets Iranian President Hassan Rouhani meet for bilateral talks.

Addressing business leaders from both nations at a meet organised by the Federation of Indian Chambers of Commerce and Industry (Ficci) on Saturday, Karbasian also hinted that both governments are aiming to discuss several pacts to boost economic relations. This includes a proposed double taxation avoidance treaty, a pact to support joint ventures between firms from both countries as well imposition of a preferential tariff, he mentioned.

"Chabahar is the symbol of multilateral transit cooperation. It is also a golden opportunity for investment for Indian corporates in the field of petrochemicals." Karbasian said.

However, the plan faces several hurdles. The lack of a proper banking channel, procedural complications and the looming threat of further sanctions against Tehran by the US might hold back Indian investments into Iran, trade experts and top guns of India Inc alike said.

Among the problems, the absence of a proper banking channel between the nations has been highlighted. “Our banks are being ultra-cautious about what will happen if the US imposes some restrictions on financial transactions,” said Naushad Forbes, co-chairman of Forbes Marshall.

“Korean, German, Japanese and Swiss banks, among others, have established connections and their companies are doing business in the country. It is high time India has at least a couple of Indian banks in Iran so that an Indian firm is able to transact business,” he added.

Difficulties in remitting capital have meant that even employees of State Bank of India's Tehran branch have to be paid salaries routed through Dubai, a senior industry source said. Uncompetitive labour and crippling sanctions have added to the difficult business environment.

Investors have also been put off by the countrywide and month-long protests against the ruling regime in Iran.