With reference to Foreign Direct Investment in India, which one of the following is considered its m

Q: What is UPSC Prelims?

UPSC Prelims is a competitive examination conducted in India. This question is from the 2020 UPSC Prelims Economy paper.

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Question

With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?

Accepted Answer

Correct Answer: B — It is a largely non-debt creating capital flow.Step-by-step Solution:FDI involves investment by a non‑resident entity in the equity capital of an Indian company, typically with a view to control or long‑term stake. A key characteristic is that FDI is a non‑debt creating flow — the investor does not have a fixed repayment obligation (unlike debt or External Commercial Borrowings). The return is variable (dividends, capital gains). ✓Why other options are incorrect:Option A: FDI in listed companies is restricted; FDI can be in unlisted, or if in listed, minimum 10% equity.Option C: FDI does not involve fixed debt‑servicing; it is equity.Option D: FII (now FPI) invests in government securities; FDI is not that.Key Concept: India’s FDI policy is under the Foreign Exchange Management Act (FEMA). The Department for Promotion of Industry and Internal Trade (DPIIT) formulates policy. FDI is allowed through automatic route or government route. Major sectors: services, computer software, telecom, construction, etc.

With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?

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With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?

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