Here is Question No. 51 a part of our series on UPSC Prelims 2020.
Q51. With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?
(a) It is the investment through capital instruments essentially in a listed company.
(b) It is largely non-debt creating capital flow.
(c) It is the investment that involves debt-servicing.
(d) It is the instrument made by foreign institutional investors in the Government securities.
Answer: B
- Option A is not correct: Foreign Direct Investment (FDI) is the investment through capital instruments by a person resident outside India in: An unlisted Indian company; or 10% or more of the post-issue paid-up equity capital on a fully diluted basis of a listed Indian company.
- Option B is correct and C is not correct: The capital invested in India via FDI is nondebt creating and not allowed to serve debt.
- Option D is not correct: An investment is called Foreign Portfolio Investment, if the investment made by a person (or institutional investors) resident outside India in capital instruments is: less than 10% of the post-issue paid-up equity capital on a fully diluted basis of a listed Indian company, or less than 10% of the paid-up value of each series of capital instruments of a listed Indian company.
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