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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 a largely non-debt creating capital flow
- c)It is the investment which involves debt-servicing
- d)It is the investment made by foreign institutional investors in the Government securities
Correct answer is option 'B'. Can you explain this answer?
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With reference to Foreign Direct Investment in India, which one of the...
(a) FDI can happen in unlisted companies also. Infact as per Mayaram panel-2014, for unlisted companies, all foreign investment is taken as FDI.
(b) A debt flow is a type of foreign capital where there is obligation for the residents to repay it. A non-debt flow is the one where there is no direct repayment obligation for the residents.
For example, in the case of FDI, there is not debt payment obligation. On the other hand, in the case of External Commercial Borrowings that is a loan taken by residents from abroad, the loan is to be repaid and this is a debt flow. When the capital inflow is a debt flow like External Commercial Borrowings or NRI deposits, it means debt payment obligation for the country.
FDI and Depository Receipts are non-debt flows. These inflows don’t create any repayment burden. On the other hand, ECBs, FCCBs, Rupee Denominated Bonds, NRI deposits and banking capital are debt creating flows.
(c) It is non-debt creating. So, it doesn’t involve debt servicing.
(d) FDI is not restricted to government securities.
Therefore, the correct answer is (b).
(b) A debt flow is a type of foreign capital where there is obligation for the residents to repay it. A non-debt flow is the one where there is no direct repayment obligation for the residents.
For example, in the case of FDI, there is not debt payment obligation. On the other hand, in the case of External Commercial Borrowings that is a loan taken by residents from abroad, the loan is to be repaid and this is a debt flow. When the capital inflow is a debt flow like External Commercial Borrowings or NRI deposits, it means debt payment obligation for the country.
FDI and Depository Receipts are non-debt flows. These inflows don’t create any repayment burden. On the other hand, ECBs, FCCBs, Rupee Denominated Bonds, NRI deposits and banking capital are debt creating flows.
(c) It is non-debt creating. So, it doesn’t involve debt servicing.
(d) FDI is not restricted to government securities.
Therefore, the correct answer is (b).
Most Upvoted Answer
With reference to Foreign Direct Investment in India, which one of the...
Foreign Direct Investment (FDI) in India is a major characteristic of the country's economic growth. FDI refers to the investment made by foreign entities in the Indian economy. It is considered a major source of capital inflow in the country, and its characteristics are as follows:
Non-debt creating capital flow:
One of the major characteristics of FDI in India is that it is a non-debt creating capital flow. This means that the investment made by foreign entities does not involve debt-servicing. Unlike loans, FDI does not require repayment of the principal amount and interest. The investment made by foreign entities is in the form of equity, which is a permanent source of capital.
Long-term investment:
FDI is a long-term investment in the Indian economy. Foreign entities invest in Indian companies for a significant period, which ranges from five to ten years or more. This long-term investment helps in the growth and development of the Indian economy.
Capital investment:
FDI is a capital investment made by foreign entities in Indian companies. The investment is made to acquire a significant stake in the company, which gives the foreign entity control over the company's operations. This capital investment helps in the expansion of the company, leading to increased employment opportunities and economic growth.
Technology transfer:
FDI also involves the transfer of technology from the foreign entity to the Indian company. This technology transfer helps in the development of the Indian economy and makes it more competitive in the global market.
Conclusion:
In conclusion, FDI in India is a major characteristic of the country's economic growth. It is a non-debt creating capital flow, a long-term investment, a capital investment, and involves technology transfer. These characteristics make FDI a significant source of capital inflow in the Indian economy, leading to growth and development.
Non-debt creating capital flow:
One of the major characteristics of FDI in India is that it is a non-debt creating capital flow. This means that the investment made by foreign entities does not involve debt-servicing. Unlike loans, FDI does not require repayment of the principal amount and interest. The investment made by foreign entities is in the form of equity, which is a permanent source of capital.
Long-term investment:
FDI is a long-term investment in the Indian economy. Foreign entities invest in Indian companies for a significant period, which ranges from five to ten years or more. This long-term investment helps in the growth and development of the Indian economy.
Capital investment:
FDI is a capital investment made by foreign entities in Indian companies. The investment is made to acquire a significant stake in the company, which gives the foreign entity control over the company's operations. This capital investment helps in the expansion of the company, leading to increased employment opportunities and economic growth.
Technology transfer:
FDI also involves the transfer of technology from the foreign entity to the Indian company. This technology transfer helps in the development of the Indian economy and makes it more competitive in the global market.
Conclusion:
In conclusion, FDI in India is a major characteristic of the country's economic growth. It is a non-debt creating capital flow, a long-term investment, a capital investment, and involves technology transfer. These characteristics make FDI a significant source of capital inflow in the Indian economy, leading to growth and development.
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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 companyb)It is a largely non-debt creating capital flowc)It is the investment which involves debt-servicingd)It is the investment made by foreign institutional investors in the Government securitiesCorrect answer is option 'B'. Can you explain this answer?
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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 companyb)It is a largely non-debt creating capital flowc)It is the investment which involves debt-servicingd)It is the investment made by foreign institutional investors in the Government securitiesCorrect answer is option 'B'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about 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 companyb)It is a largely non-debt creating capital flowc)It is the investment which involves debt-servicingd)It is the investment made by foreign institutional investors in the Government securitiesCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for 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 companyb)It is a largely non-debt creating capital flowc)It is the investment which involves debt-servicingd)It is the investment made by foreign institutional investors in the Government securitiesCorrect answer is option 'B'. Can you explain this answer?.
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