gs1medium
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 an investment which involves debt-servicing.
- D.It is the instrument made by foreign institutional investors in the Government securities.
▶ Answer & Explanation
Correct answer: B. It is largely non-debt, creating capital flow.
Foreign Direct Investment (FDI) primarily involves the acquisition of a lasting interest and control in an enterprise operating in an economy other than that of the investor. This typically takes the form of equity capital, retained earnings, and other capital, which are generally non-debt creating. While Foreign Institutional Investors (FIIs) invest in government securities and listed equities, FDI focuses on establishing or acquiring control of a business, distinguishing it from portfolio investment or debt instruments.
Source: UPSC gs1 2020