'Hot money' refers to speculative capital flows that move quickly in and out of countries, seeking the highest short-term returns or reacting to expected exchange rate movements. Foreign Portfolio Investment (FPI), which involves investing in stocks, bonds, and other financial assets, is typically considered more liquid and volatile than Foreign Direct Investment (FDI), and thus is often referred to as 'hot money' because of its potential for rapid withdrawal during times of economic uncertainty.
In India, the term ‘hot money’ is used to refer to
Asked in UPSC CDS 2 2016 · Topic: Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) (Types of FPI: Equity (FII, QFI, FPI categories), Debt, ADR/GDR)
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Answer: D. Foreign Portfolio Investment
Read the notes: Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) →
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