Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) is part of External Sector of Economy. Below are notes on 66 sub-topics, followed by practice MCQs from State PSC and UPSC papers.
Definition, Features, and Distinction between FDI and FPI
- Foreign Direct Investment (FDI)
Definition
Investment by a non-resident entity directly into the capital of an Indian company (listed or unlisted) with an intention to gain a lasting interest and significant influence or management control.
Control & Intent
Aims for management control, strategic interest, or setting up operations (e.g., setting up an educational institution).
Threshold
Investment of
10% or more of the post-issue paid-up equity capital or voting power in a listed/unlisted Indian company.
- Nature Long-term, stable capital flow. Less volatile.
Asset Creation
Involves creation of physical assets, productive capacity, employment, technology transfer, and skill development.
Debt Status
Largely
non-debt creating for the host country, as it primarily involves equity investment.
- Modes of Payment Cash is a permissible mode of payment. Also includes reinvested earnings, acquisition of existing shares, and debt between related entities.
Target Entities
Can be in listed or
unlisted companies (including greenfield projects).
- Instruments (can be FDI if >=10% equity stake) Equity shares, compulsorily convertible preference shares/debentures. Foreign Institutional Investment (FII, now part of FPI) is reclassified as FDI if it crosses the 10% equity threshold. Foreign Currency Convertible Bonds (FCCBs) and Global Depository Receipts (GDRs) can be treated as FDI if their conversion leads to a 10% or more equity stake.
Benefit
Considered highly beneficial and stable for the host country, providing resilience during financial crises (e.g., East Asian financial crisis).
Definition
Investment by a non-resident entity in Indian financial assets (primarily listed companies and debt instruments) mainly for financial returns, without seeking management control.
Control & Intent
Aims for capital appreciation or dividend income; no management control.
Threshold
Investment of
less than 10% of the post-issue paid-up equity capital or voting power in a listed Indian company.
- Nature Short-term, volatile, easily reversible ("hot money").
Asset Creation
Primarily involves financial assets; does not directly create physical assets or employment.
Debt Status
Can be
debt creating (e.g., investment in bonds, Government securities, commercial papers).
- Target Entities Primarily in listed companies, mutual funds, debt instruments.
Instruments
Shares (less than 10% holding), bonds, Government securities, commercial papers, Foreign Currency Convertible Bonds (FCCBs), Global Depository Receipts (GDRs) (if they do not lead to a 10%+ equity stake).
Risk
High risk of capital flight and market instability during economic downturns or global crises.
Objective
FDI aims for control/management; FPI aims for financial returns.
Nature of Capital Flow
FDI is stable, long-term; FPI is volatile, short-term.
Asset Creation
FDI creates physical assets, employment, and technology transfer; FPI primarily creates financial assets and provides market liquidity.
Threshold for Equity
FDI requires >= 10% equity stake; FPI involves < 10% equity stake in a listed company.
Ease of Entry/Exit
FDI is generally difficult to enter and exit; FPI is easy to enter and exit.
Debt Creation
FDI is largely non-debt creating; FPI can be debt creating (e.g., through bonds, government securities).
Global Trends in FDI and FPI and India's Position
- New Development Bank (NDB) was established by BRICS countries: Brazil, Russia, India, China, South Africa.
- New Development Bank (NDB) is located in China.
- The World Investment Report (WIR) is an annual publication of the United Nations Conference on Trade and Development (UNCTAD).
- State Bank of India (SBI) was the first Indian bank to open an office in Australia's Victoria State.
- State Bank of India (SBI) was the first Indian bank to open a branch in China.
- According to the FDI Restructureness Index (FRI) in 2012, India was the most restructured country.
- Public sector banks in India have the largest number of branches in the UK.
- Singapore remained the second largest source of FDI into India in 2017-18.
Government Policies, Reforms, and Initiatives to Attract FDI/FPI (e.g., PLI schemes, Ease of Doing Business)
- New Economic Policy (NEP) adopted an encouragement approach towards Foreign Direct Investment (FDI).
FDI Limit Increases/Easing
- Insurance Sector: FDI limit increased from 49% to 74% (Union Budget 2021).
- Local Sourcing Norms: Eased for FDI in Single Brand Retail Sector.
- Foreign Airlines: Permitted FDI up to 49% (policy change post-2010, specifically 2012).
- Multi-Brand Retail: Up to 51% FDI permitted via Government Approval Route (policy change post-2010, specifically 2012).
- Single-Brand Product Retail Trading: Policy amended for alignment with global practices (e.g., post-2010 changes in 2012, 2016, 2018).
- Sectors like aviation, media, and insurance identified for potential further opening post-multi-stakeholder examination.
- FDI
Policy
Continuity/Historical
Context
- 100% FDI in the automotive sector was permitted much prior to 2010.
FPI Reforms
- NRI Portfolio Investment Scheme route proposed to be merged with the Foreign Portfolio Investment (FPI) route.
Institutional Reforms
- Foreign Investment Promotion Board (FIPB): Abolished in 2017.
Key Initiatives
- Product-Linked Incentive (PLI) Schemes: Launched to boost domestic manufacturing and attract investments.
- Ease of Doing Business Reforms: Continuous government efforts to improve the investment climate.
- Promoting Energy Access through Clean Energy (PEACE): Initiative between Government of India and USA.
Capital Market Development
FPIs increase market liquidity, deepen capital markets (equity, debt), aid efficient price discovery, and can encourage better corporate governance due to FPI demands for transparency.
Volatility
FPIs are often considered "hot money" due to their short-term nature and sensitivity to global and domestic economic changes (e.g., interest rates, geopolitical events, risk appetite), leading to sudden large inflows or outflows that increase market (equity, debt, currency) volatility.
Exchange Rate
FPI inflows increase demand for the domestic currency, leading to appreciation (strengthening) of the rupee. Conversely, FPI outflows increase the supply of the domestic currency, causing depreciation (weakening). RBI may intervene to manage excessive volatility.
Balance of Payments (BoP)
FPIs are recorded under the Capital Account of the BoP. Inflows contribute to a surplus in the capital account and increase foreign exchange reserves; outflows lead to a deficit and deplete reserves.
Regulatory Aspects & Limits
- Government of India (GoI) and Reserve Bank of India (RBI) set investment limits for FPIs in various debt instruments, including Government Securities (G-Secs), corporate bonds, and Credit Default Swaps (CDS).
- Limits can be enhanced (e.g., $5 billion in G-Secs on 12th June 2013) to attract overseas capital, increase foreign exchange reserves, and strengthen the rupee's value.
- FPIs (previously Foreign Institutional Investors - FIIs) must be registered with SEBI to invest in Indian markets.
- RBI/SEBI issue operational frameworks for FPI investments, including guidelines for reclassification of investments if they exceed permitted limits.
- The Indian Rupee's (INR) movement and volatility are influenced by FPI flows and other capital movements, often managed by RBI intervention.
Issues related to FDI: Round-tripping, Tax Avoidance, Geopolitical considerations
- FDI Round-tripping: Domestic capital sent abroad (often to tax havens) and then rerouted back into the home country as FDI.
- Round-tripping Purpose: Used for money laundering, tax evasion, circumventing domestic regulations, or to avail FDI-specific incentives.
- FDI Tax Avoidance: Legal strategies employed by Multinational Enterprises (MNEs) to minimize their tax liabilities in host countries.
- Treaty Shopping: Exploiting favorable provisions of Double Taxation Avoidance Agreements (DTAAs) by routing investments through a third country (which has a beneficial DTAA with the host country) without substantial economic activity in the third country.
- Base Erosion and Profit Shifting (BEPS): MNE tax planning strategies to shift profits from high-tax jurisdictions to low/no-tax jurisdictions, eroding the tax base of the source country. Countered by OECD/G20 BEPS project.
- Phantom FDI: Investments that pass through empty corporate shells or Special Purpose Entities (SPEs) with minimal or no real economic activity (e.g., no employees, physical presence, or operations).
- Phantom FDI Characteristics: Inflates FDI statistics without corresponding productive investment, often used for tax minimization, regulatory arbitrage, or to obscure beneficial ownership.
- Indirect Transfers (India context): Transfer of shares of a foreign entity where the value of such shares substantially derives from underlying assets located in India.
- Indirect Transfers (Taxation in India): India's Income Tax Act was amended (retrospectively, then prospectively with conditions) to tax capital gains arising from such transfers, irrespective of where the share transfer takes place (e.g., Vodafone case).
- Geopolitical Considerations for FDI: National security, economic sovereignty, and bilateral relations influence FDI policies and approval processes.
- Geopolitical Measures: FDI screening mechanisms, restrictions on investments from specific countries or in sensitive sectors (e.g., India's Press Note 3 of 2020 requiring government approval for FDI from countries sharing a land border with India).
- Impact of Geopolitics on FDI: Can lead to diversion of FDI flows, increased scrutiny, or outright prohibition based on strategic rather than purely economic factors.
FEMA (Foreign Exchange Management Act), 1999
Principal legislation governing foreign exchange transactions, including FDI & FPI.
DPIIT (Department for Promotion of Industry and Internal Trade), Ministry of Commerce and Industry
Nodal government agency for formulating FDI policy.
Reserve Bank of India (RBI)
Implements FEMA, issues regulations regarding FDI/FPI, monitors inward/outward remittances, and specifies eligible instruments/sectors.
Securities and Exchange Board of India (SEBI)
Regulates securities markets, including registration and operations of Foreign Portfolio Investors (FPIs).
- FDI policy is primarily regulated by the DPIIT, Ministry of Commerce and Industry.
Role of FDI in 'Make in India' and specific sectors (Manufacturing, Infrastructure, Services)
Infrastructure,
Services)
- The Services sector has consistently been the largest recipient of Foreign Direct Investment (FDI) inflows into India over the last decade and in recent years.
- This dominance of the Services sector in FDI inflows dates back to earlier periods, including 1997-2000.
- Key sub-sectors within the Services sector attracting high FDI include Financial Services, Business Services, Retail & Wholesale Trade, Telecommunications, Banking, Insurance, and Research & Development (R&D).
- The 'Make in India' initiative, launched in 2014, aims to boost manufacturing and attract FDI into this sector to reduce import dependency and create jobs.
- While 'Make in India' targets manufacturing, overall FDI inflows into India continue to be predominantly absorbed by the Services sector.
- Manufacturing, Infrastructure, and other sectors like Automobile, Chemicals (other than fertilizers), Food Processing, Engineering, and Electronics also receive substantial FDI but generally less than the Services sector.
- When considering specific periods or detailed breakdowns (e.g., 2014-2015), Financial Services, as a component of the broader Services sector, frequently stands out as a top recipient.
Routes of Investment: Automatic and Government Approval Routes
- Foreign Direct Investment (FDI): Longterm capital inflow, involves acquiring a lasting management interest (usually ≥10% equity stake), aims for strategic influence and control, often involves transfer of technology/expertise, invested in physical assets or company shares.
- Foreign Portfolio Investment (FPI): Shortterm capital inflow, involves investing in financial assets (stocks, bonds, derivatives), seeks financial returns, does not aim for management control (usually <10% equity stake), easily reversible.
- FDI Routes in India: Primarily two routes for foreign investors to invest in Indian entities.
- Automatic Route:
- No prior approval from the Government of India or the Reserve Bank of India (RBI) is required.
- Investors only need to inform the RBI within 30 days of receiving FDI and within 30 days of issuing shares.
- Applicable for most sectors, subject to specified sectoral caps and other investment conditions (e.g., manufacturing, services, most financial services, e-commerce, infrastructure).
- Government Approval Route (erstwhile FIPB Route):
- Requires prior approval from the Government of India.
- Proposals are scrutinized by the relevant administrative ministry/department in consultation with the Department for Promotion of Industry and Internal Trade (DPIIT) and the Department of Economic Affairs (DEA), Ministry of Finance.
- The Foreign Investment Promotion Board (FIPB) was abolished in May 2017; its functions are now handled by the concerned ministries.
- Applicable for sectors not covered under the automatic route or where specific conditions/limits apply (e.g., defence beyond 74%, broadcasting content services, print media, atomic energy, gambling, lottery).
- Any investment from entities incorporated in countries sharing a land border with India, or where the beneficial owner is from such a country, requires prior government approval, irrespective of the sector or percentage of investment.
- ICICI Bank was the first Indian private sector bank to establish a branch in China, opening its Shanghai branch in 2003.
FDI Prohibited Sectors
- Lottery Business (Govt/private, online).
- Gambling & Betting (including casinos).
- Chit Funds & Nidhi Company.
- Trading in Transferable Development Rights (TDRs).
- Real Estate Business (excluding construction development of townships, housing, commercial premises, resorts, hotels, educational institutions, recreational facilities, and city and regional level infrastructure).
- Manufacturing of Cigars, Cigarettes, or any tobacco substitutes.
- Atomic Energy.
- Railway operations (excluding specified construction, freight, metro rail, etc.).
Defence Manufacturing
- Up to 74% via Automatic Route.
- Beyond 74% up to 100% via Government Route (if it results in access to modern technology or for other recorded reasons).
- (FDI policy changes in June 2016 liberalized the sector from 49% to 100%).
- Multi-Brand
Retail
Trading
(MBRT) 51% via Government Route (subject to conditions like minimum investment, sourcing requirements, and location restrictions). (The 51% cap was not affected by June 2016 policy changes).
Private Security Agencies
Up to 74% via Automatic Route (June 2016 policy changes liberalized from 49% to 74%).
Manufacturing of Small Arms and Ammunitions
Covered under the Defence sector policy.
Indian Cinema (Film production, exhibition, distribution, and content creation)
and
content creation) 100% via Automatic Route.
Small Scale Sector (historical, e.g., 1995-96)
24% foreign equity holding limit.
Insurance Sector
- 2012 proposal: To raise FDI limit from 26% to 49%.
- Current: Up to 74% via Automatic Route (subject to specific conditions ensuring Indian management/majority of directors).
Tea Plantations (as per 2001-02 policy)
100% via Automatic Route, with a condition requiring divestment of 26% equity in favor of an Indian partner(s) within 5 years.
Print Media (News & Current Affairs, as per 2002 policy)
26% via Government Route, with conditions for Indian management control (e.g., single largest Indian shareholder holding higher than 26%).
Cable Networks (MSO/LCO)
100% via Automatic Route.
Petroleum Refining
100% via Automatic Route.
FPI (Foreign Portfolio Investment)
Refers to passive investments in financial assets (stocks, bonds) without active management or control, typically having lower caps and different regulatory frameworks than FDI. MCQs primarily focus on FDI.
Trends and Patterns of FDI and FPI Inflows/Outflows in India
- As per Economic Survey 2023, FDI inflows in India decreased recently due to a weak global economic situation but remained higher than pre-pandemic levels.
- FDI inflows have fluctuated; rapid and continuous increase without any decrease posttelecom reforms is not accurate.
- Historically (1991-95), USA and Japan were the largest direct foreign investors in India.
- Mauritius holds the highest share in cumulative FDI inflows into India.
- During 2016-17, Mauritius was the top country for FDI equity inflows into India.
- In recent years (e.g., 2021-22, 2023-24), Singapore has emerged as the largest source of FDI to India.
- For 2021-22, the major sources of FDI to India (highest to lowest) were: Singapore > USA > Mauritius > Netherlands.
- The India-Mauritius Tax Treaty amendment has brought a significant shift in countries serving as major sources of FDI to India.
- Over the last decade, the Services sector (including financial, banking, insurance, IT, and business services) has attracted the highest FDI inflows into India.
- In recent years, Computer Software and Hardware is a dominant sector in FDI inflows, forming a significant part of the broader Services sector.
- For Outward Direct Investment (ODI) during 2020-21 (up to November 2020), USA ranked 1.
- Indian investments abroad (ODI) are mainly directed towards developed economies like the USA and Europe, as well as some Asian countries.
Types of FDI: Greenfield, Brownfield, Mergers & Acquisitions
- Foreign Direct Investment (FDI): An investment made by a foreign company or individual in business interests in another country, either by establishing business operations or by acquiring business assets. It implies significant control or lasting interest.
- Greenfield Investment: A form of FDI where a parent company starts a new venture in a foreign country by constructing entirely new operational facilities, factories, or offices from the ground up. It creates new production capacity.
- Brownfield Investment: A form of FDI where a company purchases or leases existing production facilities or assets in a foreign country. It involves taking over or upgrading existing operations rather than building new ones.
- Mergers & Acquisitions (M&A): A specific type of Brownfield FDI where a foreign entity acquires an existing company (acquisition) or merges with a domestic company (merger). This involves purchasing existing equity stakes.
- Distinction from Foreign Portfolio Investment (FPI): FPI involves passive investment in financial assets (e.g., stocks, bonds) without gaining significant control or managerial influence, whereas FDI implies a long-term interest and control over the enterprise.
Foreign Direct Investment (FDI)
- Long-term investment, typically involving control or significant influence (usually >10% equity stake).
- Involves transfer of technology, management expertise, and job creation.
- Less volatile than FPI.
Foreign Portfolio Investment (FPI)
- Short-term, passive investment with no controlling interest (usually <10% equity stake).
- Often referred to as "hot money" due to its highly liquid and volatile nature.
- Mainly seeks financial returns through capital gains or dividends.
Equity
- Foreign Institutional
Investors (FIIs) Historical category for institutional investors (e.g., mutual funds, pension funds, hedge funds) investing in Indian securities.
- Qualified
Foreign
Investors (QFIs) Introduced to allow individual foreign investors, groups, and associations from Financial Action Task Force (FATF) compliant countries to invest directly.
- Foreign
Portfolio
Investors (FPIs) Since 2014, a consolidated category that subsumed FIIs, QFIs, and their sub-accounts. Categorized into I, II, III based on risk profile and compliance.
- Participatory Notes (P-
Notes)
- Issued by registered Foreign Portfolio Investors (formerly FIIs) to overseas investors.
- Allow overseas investors to invest in Indian stock markets without registering directly with SEBI.
- Derivative instruments based on underlying Indian securities.
- Are part of FPI.
- Debt Investment in Indian debt instruments (e.g., government bonds, corporate bonds).
- American
Depository
Receipts (ADRs)
- Certificates issued by a US depository bank representing shares of a nonUS company.
- Traded on US stock exchanges, denominated in USD.
- Allow Indian companies to raise capital from US investors.
- Considered part of FPI.
Global Depository Receipts (GDRs)
- Certificates issued by an international depository bank representing shares of a non-US company.
- Traded on global stock exchanges (outside US),
6. External Commercial Borrowings (ECB)
Practice MCQs: Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI)
Definition, Features, and Distinction between FDI and FPI
Which one of the following would be considered as Foreign Direct Investment ?
Asked in: UPSC CDS 1 2022
- A foreign company buying shares in stock exchanges in India
- A foreign country pension fund investing in Indian stock markets
- A foreign merchant banker buying shares from Indian stock markets
- A foreign entity setting up an educational institution in India
Show answer
Answer: D. A foreign entity setting up an educational institution in India
Foreign Direct Investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country. FDI typically involves establishing a lasting interest or controlling ownership in a foreign enterprise. This can be done by establishing a new business (greenfield investment) or acquiring a significant stake in an existing one. - Options A, B, and C describe portfolio investment, which involves buying shares purely for financial return without seeking management control. Investing in stock markets (unless it's a significant stake aiming for control) is typically portfolio investment. - Option D, setting up a new educational institution, involves creating physical infrastructure, employing staff, and operating a business in India, representing a clear instance of greenfield FDI.
Which of the following statements is/are correct regarding Foreign Direct Investments (FDI)?
Asked in: GPSC Prelims CSP 2 2021
- Cash is also permissible mode of payment
- Any investment in an unlisted entity also can be treated as FDI
- Both (A) and (B)
- Neither (A) nor (B)
Show answer
Answer: B. Any investment in an unlisted entity also can be treated as FDI
FDI is defined as the investment by a non-resident entity into an Indian company or LLP, primarily through equity instruments. The mode of remittance must be through authorized banking channels.
With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic ?
Asked in: UPSC IAS 2020
- It is the investment through capital instruments essentially in a listed company.
- It is a largely non-debt creating capital flow.
- It is the investment which involves debt-servi‐ cing.
- It is the investment made by foreign institu‐ tional investors in the Government securities.
Show answer
Answer: B. It is a largely non-debt creating capital flow.
- A) FDI can be made in both listed and unlisted companies, not essentially limited to listed ones. Incorrect. - B) FDI primarily involves equity investment, meaning the foreign investor takes ownership stake in the domestic company. This inflow of capital is largely non-debt creating for the host country's balance of payments, unlike external commercial borrowings or portfolio debt. This is a major characteristic. Correct. - C) While the business receiving FDI might take on debt, the FDI inflow itself is equity, which leads to profit sharing or capital gains, not debt servicing in the traditional sense for the host economy's external liabilities related to the FDI equity. Incorrect. - D) Investment by foreign institutional investors (now Foreign Portfolio Investors - FPIs) in government securities is classified as Foreign Portfolio Investment (FPI), not FDI. FDI involves acquiring a lasting interest and control in an enterprise. Incorrect.
Consider the following : 1. Foreign currency convertible bonds 2. Foreign institutional investment with certain conditions 3. Global depository receipts 4. Non-resident external deposits Which of the above can be included in Foreign Direct Investments?
Asked in: UPSC IAS 2021
- 1, 2 and 3
- 3 only
- 2 and 4
- 1 and 4
Show answer
Answer: A. 1, 2 and 3
FDI is primarily distinguished by the level of equity investment (typically >=10%) and the intent to gain control or significant influence, irrespective of the specific instrument used (equity shares, convertible instruments, etc.).
Global capital flows to developing countries increased significantly during the nineties. In view of the East Asian financial crisis and Latin American experience, which type of inflow is good for the host country?
Asked in: UPPCS Prelims 2002
- Commercial loans
- Foreign Direct Investment
- Foreign Portfolio Investment
- External Commercial Borrowings
Show answer
Answer: B. Foreign Direct Investment
The East Asian financial crisis (1997-98) and Latin American debt crises highlighted the risks associated with volatile capital flows, particularly short- term debt (commercial loans, external commercial borrowings) and foreign portfolio investment (FPI). These types of inflows can be quickly withdrawn during times of economic stress or changes in global sentiment, leading to currency depreciation, liquidity crises, and economic instability in the host country. Foreign Direct Investment (FDI), in contrast, involves establishing or acquiring lasting interests in enterprises in the host country, is long- term in nature, less liquid, and tends to be more stable. FDI brings not just capital but also technology, management expertise, and access to new markets, making it generally considered the most beneficial and least volatile type of capital inflow for developing countries.
FDI stands for
Asked in: FINANCE AND ACCOUNTS OFFICER TREASURY OFFICER 2016
- Fiscal Deposit Index
- Fiscal Direct Index
- Foreign Direct Investment
- Foreign Deposit Index
Show answer
Answer: C. Foreign Direct Investment
FDI stands for Foreign Direct Investment. It is a significant component of international economic activity.
Global Trends in FDI and FPI and India's Position
Which one of the following countries is not a founding member of the New Development Bank ?
Asked in: UPSC CDS 2 2019
- Brazil
- Canada
- Russia
- India
Show answer
Answer: B. Canada
The New Development Bank (NDB) was established by the BRICS states (Brazil, Russia, India, China, and South Africa) as a multilateral development bank. The founding members are explicitly the BRICS countries.
The World Investment Report (WIR) is published by :
Asked in: HPPSC HPAS Prelims 2014
- International Monetary Fund (IMF)
- United Nations Conference on Trade and Development (UNCTAD)
- General Agreement on Tariffs and Trade (GATT)
- Organisation of Economic Cooperation and Development (OECD)
Show answer
Answer: B. United Nations Conference on Trade and Development (UNCTAD)
WIR is a key source of information for policymakers, academics, and investors on issues related to FDI and its impact on development.
World Investment Report (WIR) is published by whom?
Asked in: HPPSC HPAS Prelims 2014
- IMF
- UNCTAD
- GATT
- OECD
Show answer
Answer: B. UNCTAD
This report provides detailed analysis and data on global trends in foreign direct investment (FDI).
Which bank has became the first Indian Bank to have an office in Australia's Victoria State ?
Asked in: MPSC CS Prelims 2022
- Dena Bank
- SBI
- BOB
- PNB
Show answer
Answer: B. SBI
State Bank of India was the first Indian bank to establish an office in the state of Victoria, Australia. SBI opened its Melbourne office in 2011.
Which bank has been established in China by BRICS countries ?
Asked in: UPPCS Prelims 2017
- New Industrial Development Bank
- New Agricultural Development Bank
- New Development Bank
- New Commercial Bank
Show answer
Answer: C. New Development Bank
The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS states (Brazil, Russia, India, China and South Africa). It was established to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries.
Which bank became the first bank to open its branch in China ?
Asked in: UPPCS Prelims 2011 · UPPSC Upper Mains 2007
- IDBI Bank
- HDFC Bank
- State Bank of India
- Punjab National Bank
Show answer
Answer: C. State Bank of India
SBI opened its Shanghai branch on October 2,
This marked a significant step for an Indian bank establishing a physical presence in mainland China. 13. Which one of the following countries is the most restructure country according to FDI Restructureness Index (FRI) in 2012?
Asked in: UPPSC Upper Mains 2014
- China
- India
- Pakistan
- Iran
Show answer
Answer: B. India
- The question refers to a specific index, the FDI Restructureness Index, for the year 2012. - While the index is obscure, India was actively pursuing FDI policy reforms around 2012. - Information suggests that India was ranked as the most restructured country by this specific index in 2012.
The public sector banks in India have the largest number of branches in which of the following countries?
Asked in: westbengal/WBCS Main 2019 Paper 5 2019
- Singapore
- UAE
- UK
- Hong Kong
Show answer
Answer: C. UK
Historically, the United Kingdom has had the largest number of branches or subsidiaries of Indian public sector banks among foreign countries. London has been a major international financial centre with a strong historical connection to India, leading many Indian banks to establish a significant presence there.
Government Policies, Reforms, and Initiatives to Attract FDI/FPI (e.g., PLI schemes, Ease of Doing Business)
Which of the following is not a measure adopted by government to make India a more attractive FDI destination?
Asked in: GPSC Prelims CSP 2 2019
- Insurance intermediate to get 75% FDI
- Local Sourcing norms to be eased for FDI in Single Brand Retail Sector
- NRI Portfolio Investment Scheme route is proposed to be merged with the foreign portfolio investment route
- FDI sectors like aviation, media and insurance sectors can be opened further after multi stakeholder examinations
Show answer
Answer: A. Insurance intermediate to get 75% FDI
The government has implemented various policy changes to liberalize the FDI regime and make India a more attractive destination for foreign investment. These include easing sector-specific limits and norms, and simplifying investment routes.
Which of the following is/are not FDI policy change(s) after 2010? 1. Permission of 100 percent FDI in the automotive sector. 2. Permitting foreign airlines to make FDI up to 49 percent. 3. Permission of up to 51 percent FDI under the government approval route in multi-brand retailing, subject to specified conditions. 4. Amendment of policy on FDI in single-brand product retail trading for aligning with global practices.
Asked in: UPSC NDA 1 2016
- 1 only
- 2 and 4 only
- 1 and 2 only
- 1, 2 and 3 only
Show answer
Answer: A. 1 only
- FDI policies are frequently reviewed and amended by the Government of India. - Specific sector caps and approval routes change over time. - 100% FDI in the automotive sector under the automatic route has been a longstanding policy. - Permitting FDI in sectors like multi-brand retail and by foreign airlines were significant policy shifts made after 2010.
In India, Foreign Investment Promotion Board now works under
Asked in: UPPSC Upper Mains 2007
- Reserve Bank of India
- Ministry of External Affairs
- Ministry of Commerce
- Ministry of Finance
Show answer
Answer: D. Ministry of Finance
The Foreign Investment Promotion Board (FIPB) was a government body responsible for processing Foreign Direct Investment (FDI) proposals and making recommendations for government approval. At the time this question would likely have been relevant (around 2009), FIPB was under the Department of Economic Affairs in the Ministry of Finance.
Promoting Energy Access through Clean Energy (PEACE) is an initiative between Government of India and _______.
Asked in: WBCS Main Paper 3 2021
- France
- USA
- Japan
- UAE
Show answer
Answer: B. USA
The PEACE initiative is a collaboration aimed at promoting clean energy technologies and improving energy access in India.
The new economic policy took this approach toward foreign direct investment __________
Asked in: WBCS Main Paper 5 2021
- Encouragement
- Discouragement
- Neutral
- No change in previous approval
Show answer
Answer: A. Encouragement
The New Economic Policy (NEP) of 1991 marked a paradigm shift in India's economic strategy, moving away from an inward-looking, protectionist approach towards liberalization, privatization, and globalization (LPG). A key pillar of this policy was the active encouragement of Foreign Direct Investment (FDI) to attract foreign capital, technology, and management expertise, which were seen as crucial for economic growth and modernization.
The Union Budget for 2020-21 announced an increase in Foreign Direct Investment (FDI) limit in insurance from 49% to
Asked in: Agriculture Development Officer 2021
- 51%
- 60%
- 74%
- 75%
Show answer
Answer: C. 74%
The FDI limit in the insurance sector was increased from 49% to 74% in the Union Budget 2020-21. This move aimed to attract more foreign capital into the insurance industry, thereby enhancing its growth and development.
The Foreign Investment Promotion Board was abolished in the year
Asked in: GS JE PHE 29 2023 2407 2024
- 2015
- 2017
- 2014
- 2016
Show answer
Answer: C. 2014
The Foreign Investment Promotion Board (FIPB) was abolished in the year 2014.
Impact of FPI: Capital Market Development, Volatility, Exchange Rate, Balance of Payments
The Government of India on 12th June, 2013 enhanced the limit of foreign investments in government securities by 5 billion US dollar. In this regard, which of the following statements is not correct?
Asked in: UPSC CAPF 2013
- It was done in order to increase inflow of overseas capital
- It will strengthen the value of rupee
- The foreign institutional investors registered to SEBI are only eligible for investment in the enhanced limit of 5 billion US dollar
- The investment can be made in all categories of investments across the board
Show answer
Answer: D. The investment can be made in all categories of investments across the board
- The government enhanced the limit of foreign investments specifically in government securities (G-secs) and corporate bonds by $5 billion in June
This measure was aimed at attracting more foreign capital inflow to support the Indian rupee, which was facing depreciation pressure at the time. - Increasing foreign investment limits in debt markets (like G-secs) helps increase the supply of foreign currency (US Dollars) in the Indian market, which can strengthen the demand for the Indian Rupee, potentially supporting its value. - Foreign Institutional Investors (FIIs, now largely replaced by Foreign Portfolio Investors - FPIs) registered with SEBI are the primary channels through which foreign investments are made in the Indian securities market under specified limits and regulations. Therefore, eligibility was indeed restricted to such registered entities. - The enhancement was specifically for investments in government securities and corporate bonds, not "all categories of investments across the board", which would include equities, alternative investment funds, etc. 25. Which of the following statements is/are correct about Foreign Portfolio Investments (FPI) in 2024-25 ? I. The Indian Rupee (INR) moved in a narrow range with low volatility despite FPI outflows. II. RBI set investment limits for FPIs in debt instruments and Credit Default Swaps. III. FPI investment limits in government securities and corporate bonds remained unchanged. IV. RBI issued an operation framework for reclassification of FPI investments beyond permitted limits.
Asked in: APPSC Group II Mains paper 2 2025
- I and II only
- III and IV only
- All the above
- None of the above
Show answer
Answer: A. I and II only
RBI regulates FPI investments in debt and overseas the reclassification framework. Statement II is a correct description of RBI's role. Statement I is a claim about market behavior which is plausible under certain conditions, making option A the most likely intended answer if II is definitely correct.
Issues related to FDI: Round-tripping, Tax Avoidance, Geopolitical considerations
Phantom FDI sometimes in news is described as
Asked in: GPSC Prelims CSP 2 2023
- Investments done in greenfield projects
- Investments done by high networth individuals
- Investments that pass through empty corporate shells
- None of the above
Show answer
Answer: C. Investments that pass through empty corporate shells
Phantom FDI is a term used to describe foreign direct investment that does not represent real economic activity in the host economy. It typically involves multinational corporations routing funds through special purpose entities (SPEs) or "empty corporate shells" in low-tax jurisdictions or investment hubs primarily for tax optimization or regulatory arbitrage purposes. Such investments artificially inflate FDI figures but contribute little to the real economy in terms of jobs, capital formation, or productivity. - Option A describes greenfield investment, which is real FDI. - Option B describes investments by high-net-worth individuals, which could be real or phantom depending on the structure. - Option C accurately describes the nature of phantom FDI using corporate shells.
Which one of the following situations best reflects "Indirect Transfers" often talked about in media recently with reference to India?
Asked in: UPSC IAS 2022
- An Indian company investing in a foreign en‐ terprise and paying taxes to the foreign country arising out of its investment
- A foreign company investing in India and paying taxes to the country of its base on the profits arising out of its investment
- An Indian company purchases tangible assets in a foreign country and sells such assets after their value increases and transfers the proceeds to India
- A foreign company transfers shares and their substantial value derive from assets located in In‐ dia
Show answer
Answer: D. A foreign company transfers shares and their substantial value derive from assets located in In‐ dia
"Indirect Transfer" refers to the transfer of ownership of shares or interests in a foreign entity, where the value of that foreign entity is primarily derived from assets located in India. This allows for taxing gains arising from such transfers within India.
Regulatory Framework for FDI and FPI (FEMA, SEBI, RBI, DPIIT)
The ‘Foreign Direct Investment’ policy in India is regulated by
Asked in: UPSC Combined Section Officer 2019 20
- the Ministry of Commerce and Industry
- the Reserve Bank of India
- the Ministry of External Affairs
- the Securities and Exchange Board of India
Show answer
Answer: A. the Ministry of Commerce and Industry
- Foreign Direct Investment (FDI) policy in India is framed and reviewed by the Government of India. - The Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry, is the nodal department for formulating FDI policy. It is responsible for the calculation, announcement, and implementation of FDI policies, including permissible sectors, entry routes (automatic or government approval), and caps. - While the Reserve Bank of India (RBI) is the administrator of the Foreign Exchange Management Act (FEMA), 1999, and handles the operational aspects related to FDI inflow and outflow (like prescribing procedures, reporting requirements, etc.), the overarching policy framework is laid down by the government, specifically DPIIT. - The Ministry of External Affairs deals with foreign relations and diplomacy, not domestic economic policies like FDI regulation. - The Securities and Exchange Board of India (SEBI) regulates the securities markets and portfolio investments (like Foreign Portfolio Investment - FPI), but not the core FDI policy.
Role of FDI in 'Make in India' and specific sectors (Manufacturing, Infrastructure, Services)
In the last one decade, which one among the following sectors has attracted the highest foreign direct investment inflows into India?
Asked in: APSC CCE Prelims Exam 2014
- Chemicals other than fertilizers
- Telecommunication
- Food processing
- Services sector
Show answer
Answer: D. Services sector
The Services sector is a broad category that includes financial, banking, insurance, business services, outsourcing, R&D, courier, testing and analysis, etc. Its growth and liberalisation have made it a prime destination for foreign investment.
Which of the following sectors has attracted the highest Foreign Direct Investment flows into India during the recent years ?
Asked in: OPSC CS Prelims 2017
- Chemicals other than fertilizers
- Services Sector
- Food Processing
- Telecommunication
Show answer
Answer: B. Services Sector
The Services sector in India is a broad category that includes financial, banking, insurance, business services, R&D, courier, tech testing & analysis, etc. Its strong performance, deregulation, and potential for growth have made it highly attractive for foreign investors.
Which sector in India attracts the highest FDI equity flow ?
Asked in: UKPSC CS Prelims 2016
- Construction sector
- Energy sector
- Service sector
- Automobile sector
Show answer
Answer: C. Service sector
The services sector encompasses various sub-sectors such as financial services, banking, insurance, business services, R&D, testing and analysis, education, etc., which have consistently been major recipients of FDI in India.
Which sector is estimated highest with respect to FDI during 2014-2015 in India?
Asked in: WBPSC CS Prelims 2016
- Manufacturing
- Financial Services
- Retail and Wholesale trade
- None of the above
Show answer
Answer: B. Financial Services
According to data from the Department for Promotion of Industry and Internal Trade (DPIIT), the Services Sector (comprising Financial, Banking, Insurance, R&D, Courier, Tech. Testing and Analysis, etc.) consistently attracted the highest cumulative FDI equity inflows into India over many years, including the period 2014-2015. While the option specifically lists "Financial Services" and not the entire "Services Sector", it is the most relevant category among the choices and is a significant part of the overall Services sector which led FDI inflows.
The largest share of Foreign Direct Investment (1997-2000) went to
Asked in: UPPCS Prelims 2001
- Food and food product sector
- Engineering sector
- Electronics and electric equipment sector
- Service sector
Show answer
Answer: C. Electronics and electric equipment sector
- FDI distribution varies across sectors depending on the economic policies, growth drivers, and global investment trends of a period. - In the late 1990s in India, sectors like Electrical Equipment, Telecommunications, and Services were major recipients of FDI following economic liberalization.
Which one of the following sector is the largest recipient of FDI inflow in India in recent years?
Asked in: Sr. Teacher Gr II (Sec. Edu.) Comp. Exam 2022
- Agriculture Sector
- Industrial Sector
- Services Sector
- Information Technology Sector
Show answer
Answer: C. Services Sector
d-2022 Understanding the trends and sectoral distribution of Foreign Direct Investment (FDI) in India is a core aspect of economic analysis.
Which among the following sectors is the largest receiver of Foreign Direct Investment in India?
Asked in: ASCO 2014
- Services
- Automobile
- Telecom
- Pharmaceuticals
Show answer
Answer: A. Services
HORTICULTURE DEVELOPMENT OF‐ FICER(HDO) -2015 The Services sector, encompassing areas like IT, telecommunications, financial services, and trade, attracts the most FDI in India.
Which among the following sectors is the largest receiver of Foreign Direct Investment in India? - [A] Services - [C] Telecom - [B] Automobile - [D] Pharmaceuticals
Asked in: POST GRADUATE TEACHER (PGT) 2018
- Services
- Automobile
- Telecom
- Pharmaceuticals
Show answer
Answer: A. Services
The services sector's broad scope and its contribution to India's GDP make it a prime target for foreign investment.
Routes of Investment: Automatic and Government Approval Routes
Which of the following Private Bank for the first time did set up its branch in China?
Asked in: UPPSC Upper Mains 2014
- IClCI Bank
- HDFC Bank
- AXIS Bank
- Samadhan Bank
Show answer
Answer: A. IClCI Bank
Establishing a presence in China was a strategic move for Indian banks to support bilateral trade and investment.
Sectoral Caps, Conditions, and Prohibited Sectors for FDI and FPI
Which one of the following sectors is not affected by the changes made in the Foreign Direct Investment Policy in June 2016?
Asked in: UPSC CDS 1 2017
- Multi-brand retailing
- Defence
- Private security agencies
- Manufacturing of small arms and ammunitions covered under the Arms Act, 1959
Show answer
Answer: A. Multi-brand retailing
The June 2016 FDI policy changes focused on liberalizing norms in many sectors. Multi-brand retail FDI policy (51% with conditions) was not part of the major liberalization drive in this specific announcement.
As per the extant policy, Foreign Direct Investment is permitted in the defence sector under the automatic route up to which one of the following limits?
Asked in: UPSC CDS 2 2018
- 26 percent
- 74 percent
- 51 percent
- 49 percent
Show answer
Answer: B. 74 percent
- The limit for FDI under the automatic route in the defence sector was 49%. - Beyond 49% and up to 100%, FDI was permitted under the government route, provided it was likely to result in access to modern technology or for other reasons to be recorded.
The Foreign Direct Investment in India's Defence Sector is allowed up to _______.
Asked in: GPSC Prelims CSP 2 2017
- 26 percent
- 49 percent
- 74 percent
- 100 percent
Show answer
Answer: C. 74 percent
Prior to 2014, the limit was 26%. It was raised to 49% in August 2014. Further liberalization occurred in 2020, increasing the automatic route limit to 74% and permitting 100% via the government route in cases of modern technology access. Given the options, 49% represents a significant phase of policy.
What is the percentage of Foreign Direct Investment (FDI) allowed in Indian Cinema ?
Asked in: GPSC Prelims CSP 1 2019
- FDI is not allowed
- 51%
- 90%
- 100%
Show answer
Answer: D. 100%
According to India's Foreign Direct Investment (FDI) policy, 100% FDI is permitted in the film sector (including film production, distribution, and exhibition services) under the automatic route.
Foreign Equity holding allowed in small scale sector in 1995-96 is :
Asked in: UPPCS Prelims 1995
- 35%
- 24%
- 49%
- 51%
Show answer
Answer: B. 24%
- The small scale sector has historically been important for employment generation in India. - Policies regarding foreign direct investment (FDI) are part of a country's overall economic strategy. - The 24% limit was a specific policy decision for the SSI sector during that era.
Most recently, FDI has now been opened in which of the following sectors in India ?
Asked in: UPPSC Upper Mains 2010
- Gambling and beeting
- Lottery business
- Chit fund and Nidhi
- Retail trade
Show answer
Answer: D. Retail trade
While other options like Gambling, Lottery, Chit funds, and Nidhi companies generally remain restricted or prohibited for FDI in India, FDI policy changes concerning Retail Trade were a significant development during that timeframe.
On October 4, 2012, the Government of India has proposed to change the limits of FDI in Insurance Sector. It is proposed to
Asked in: UPPSC Upper Mains 2013
- raise the FDI limit from 26% to 49%
- raise the FDI limit from 49% to 74%
- raise the FDI limit from 26% to 51 %
- decrease the FDI limit from 74% to 49%
Show answer
Answer: A. raise the FDI limit from 26% to 49%
Prior to this proposal, the FDI limit in the Indian insurance sector was capped at 26%.
With reference to Government of India’s I decisions regarding Foreign Direct Investment (FDI) during the year 2001- 02, consider the following statements: Out of the 100% FDI allowed by India in tea sector, the foreign firm would have to disinvest 33% of the equity in favour of an Indian partner within four years. Regarding the FDI in print media in India, the single largest Indian shareholder should have a holding higher than 26% Which of these statements is/are correct?
Asked in: UPPCS Prelims 2003
- Only 1
- Only 2
- Both 1 and 2
- Neither 1 nor 2
Show answer
Answer: B. Only 2
The Indian government significantly liberalized FDI policy in print media (news and current affairs) in mid-2002, allowing up to 26% FDI. To ensure Indian control over news content, strict conditions were imposed, including that the majority stake must be held by Indians and, specifically, the single largest Indian shareholder must hold more than 26% of the equity. This condition was part of the guidelines to prevent foreign entities from gaining controlling influence despite the 26% FDI cap.
Trends and Patterns of FDI and FPI Inflows/Outflows in India
As per the Economic Survey, 2023, which of the following statements describe(s) the trend of Foreign Direct Investment in India? 1. It has decreased due to the less participation of the private sector. 2. It has increased compared to the prepandemic levels. 3. It has increased rapidly without decreasing in any Financial Year after the telecom sector was entirely reformed. 4. It has decreased due to a weak global economic situation. Select the correct answer using the codes given below.
Asked in: BPSC Prelims Exam 69th
- Only 1 and 3
- 2 and 4
- 1, 2 and 3
- Only 4
Show answer
Answer: B. 2 and 4
- India experienced strong FDI inflows in the years leading up to and including FY22. - Overall FDI levels in FY23 were higher than pre-pandemic levels. - Global economic headwinds in FY23 contributed to a moderation or slight decrease in FDI compared to the FY22 peak.
As per the data up to November, 2020, released by the Union Finance Ministry, which one of the following countries ranks 1 in terms of ODI (Outward Direct Investment) for the year 2020 - 21 ?
Asked in: UPSC NDA 1 2021
- USA
- Singapore
- Mauritius
- United Kingdom
Show answer
Answer: B. Singapore
Reports from the Reserve Bank of India (RBI) and the Ministry of Finance during this period indicated significant outflows of investment from India to Singapore, often placing it at or near the top of the list of destination countries for ODI.
In terms of the share in Foreign Direct Investment Equity inflows, in India during 2016-17, which of the following countries is on the top ?
Asked in: RPSC RAS Prelims 2018
- Mauritius
- Singapore
- Japan
- U.S.A.
Show answer
Answer: A. Mauritius
Foreign Direct Investment (FDI) equity inflows into India come from various countries. The ranking of top investor countries changes over time.
Arrange the following major sources of India's Foreign Direct Investment (FDI) during 2021-22 from highest to lowest : A. United States of America B. Mauritius C. Singapore D. Netherlands
Asked in: TSPSC Group 1 Prelims 2022
- D, B, A, C
- B, A, C, D
- C, A, B, D
- A, B, D, C
Show answer
Answer: C. C, A, B, D
According to data released by the Department for Promotion of Industry and Internal Trade (DPIIT) for FY 2021-22, the major sources of Foreign Direct Investment (FDI) equity inflow into India were: 1. Singapore (C): USD 15.87 billion 2. USA billion 4. Netherlands (D): USD 4.62 billion Arranging these from highest to lowest inflow gives the order: Singapore > USA > Mauritius > Netherlands, which corresponds to C > A > B > D.
Given below are two statements, one is labelled as Assertion (A) and the other as Reason (R). Assertion (A): During 2023-24, Singapore emerged as the largest source of FDI to India. Reason (R): The India Mauritius Tax Treaty amendment has brought a major shift in countries as major sources of FDI to India. Select the correct answer from the codes given below:
Asked in: UPPCS Prelims 2024
- Both (A) and (R) are true, but (R) is not the correct explanation of (A).
- (A) is false, but (R) is true.
- Both (A) and (R) are true and (R) is the correct explanation of (A).
- (A) is true, but (R) is false.
Show answer
Answer: A. Both (A) and (R) are true, but (R) is not the correct explanation of (A).
Assertion (A) states that during 2023-24, Singapore emerged as the largest source of FDI to India. According to data released by the Department for Promotion of Industry and Internal Trade (DPIIT), Singapore was indeed the largest source country for FDI equity inflows into India during the financial year 2023-24. Thus, Assertion (A) is true. Reason (R) states that the India Mauritius Tax Treaty amendment has brought a major shift in countries as major sources of FDI to India. The India-Mauritius Double Taxation Avoidance Agreement (DTAA) was amended in 2016 (taking effect from 2017) to withdraw the capital gains tax exemption on investment in Indian shares routed through Mauritius. This significantly reduced the attractiveness of Mauritius as an investment route and led to a shift in FDI inflows towards other jurisdictions like Singapore and the Netherlands. Thus, Reason (R) is true as the amendment did cause a major shift in FDI source countries over time. However, Reason (R) is not the direct and sole explanation for Assertion (A). While the shift away from Mauritius contributed to other countries' increased prominence, including Singapore, it doesn't specifically explain why Singapore became the largest source in 2023-24. Singapore's own economic status, its investment treaty with India, and other factors also contribute to its position. The Reason describes a historical shift, not the specific dynamics that made Singapore the top source in that particular year.
During 1991-95 the countries which brought largest direct foreign investment to India are:
Asked in: UPPCS Prelims 1995
- USAand Japan
- USA and Germany
- Japan and Israel
- USA and Israel
Show answer
Answer: A. USAand Japan
- Following the 1991 reforms, India opened up many sectors to foreign investment. - The USA consistently ranked as the top or among the top sources of FDI in India during the early to mid-1990s. - Japan was also a significant investor during this period, often ranking among the top few countries investing in India. - Germany and Israel were not as prominent as the USA and Japan in terms of the volume of FDI flows to India during 1991-95.
India receives largest inflow of foreign capital in equity investment from
Asked in: UPPSC Upper Mains 2010
- U.S.A.
- Singapore
- Switzerland
- Mauritius
Show answer
Answer: D. Mauritius
While recent years have seen Singapore also emerge as a top source, Mauritius has consistently been the largest or among the top sources for a long time.
Which country among the following has the highest share In cumulative FDI inflows into India?
Asked in: UPPSC Upper Mains 2006
- Mauritius
- U.S.A.
- Japan
- U.K.
Show answer
Answer: A. Mauritius
- Mauritius served as a preferred investment route due to tax advantages provided by the DTAA, allowing investors (including those from third countries) to route their investments through Mauritius to benefit from lower capital gains tax in India. - While the DTAA was amended in 2016 to phase out tax benefits, Mauritius remained a major source of cumulative FDI for many years.
Types of FDI: Greenfield, Brownfield, Mergers & Acquisitions
What is Greenfield Investment?
Asked in: OPSC CS Prelims 2019
- A form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities
- A form of foreign direct investment where a company purchases or leases existing production facilities to launch a new production activity
- Investment by non-resident Indians
- Investment in share and debts
Show answer
Answer: A. A form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities
This involves constructing new facilities, hiring new staff, and starting production or service delivery from scratch in the host country. It contrasts with 'Brownfield investment', which involves acquiring or merging with existing facilities or companies.
Which of the following is not an example of foreign direct investment ?
Asked in: UKPSC CS Prelims 2021
- The acquisition of existing textile mill over‐ seas
- The creation of a wholly owned business firm overseas
- The purchase of bonds or stocks issued by Pharma Company overseas
- The construction of a new steel plant overseas
Show answer
Answer: C. The purchase of bonds or stocks issued by Pharma Company overseas
- FDI involves control or significant influence over a foreign enterprise. - Portfolio investment involves acquiring shares or bonds without gaining control. - Examples of FDI include mergers & acquisitions, greenfield investments (new facilities), and joint ventures.
Types of FPI: Equity (FII, QFI, FPI categories), Debt, ADR/GDR
In India, the term ‘hot money’ is used to refer to
Asked in: UPSC CDS 2 2016
- Currency + Reserves with the RBI
- Net GDR
- Net Foreign Direct Investment
- Foreign Portfolio Investment
Show answer
Answer: D. Foreign Portfolio Investment
'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.
Participatory Notes (PNs) are associated with which one of the following ?
Asked in: HPPSC HPAS Prelims 2011
- Consolidated Fund of India
- Foreign Institutional Investors
- United Nations Development Programme
- Kyoto Protocol
Show answer
Answer: B. Foreign Institutional Investors
Participatory Notes, also known as P-Notes, are offshore derivative instruments used by foreign investors to invest in Indian stock markets without registering directly with the Securities and Exchange Board of India (SEBI). They are issued by registered Foreign Institutional Investors (FIIs) or Foreign Portfolio Investors (FPIs) to overseas investors.
Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly?
Asked in: UPSC IAS 2019
- Certificate of Deposit
- Commercial Paper
- Promissory Note
- Participatory Note
Show answer
Answer: D. Participatory Note
Participatory Notes (P-Notes) allow unregistered overseas investors to indirectly invest in Indian securities through registered FPIs.
The instruments issued by registered FIIS to overseas investors, who wish to invest in Indian stock markets without registering themselves with SEBI - known as
Asked in: westbengal/WBCS Main 2019 Paper 5 2019
- Certificates of Deposit (CDs)
- Participatory notes (P-notes)
- Currency Derivatives
- Foreign exchange reserves
Show answer
Answer: B. Participatory notes (P-notes)
Participatory notes (P-notes) are financial instruments issued by registered Foreign Institutional Investors (FIIs) or Foreign Portfolio Investors (FPIs) to overseas investors who wish to invest in Indian stock markets without registering themselves directly with the Securities and Exchange Board of India (SEBI).
Consider the following statements about P- notes: 1. P-notes stands for Promissory Notes 2. P-notes stands for Participatory Notes 3. P-notes can be issued by a Mutual Fund Manager 4. P- notes can be issued by a registered FII Choose the correct statement(s).
Asked in: FINANCE AND ACCOUNTS OFFICER TREASURY OFFICER 2016
- 1 only
- 2 only
- 1 and 3 only
- 2 and 4 only
Show answer
Answer: D. 2 and 4 only
Participatory Notes (P-notes) are offshore derivative instruments through which foreign investors can invest in Indian securities without undergoing the