Which one of the following would be considered as Foreign Direct Investment ?

Foreign Direct Investment (FDI) is characterized by a foreign entity establishing a lasting interest and significant control over an enterprise in another country [4]. It typically involves the primary market, where new capital flows directly into a company to build new factories, infrastructure, or subsidiaries, known as Greenfield investment [3]. Setting up an educational institution in India represents a Greenfield FDI as it involves creating new operations from the ground up [4]. In contrast, options 1, 2, and 3 describe Foreign Portfolio Investment (FPI). FPI generally occurs in the secondary market (stock exchanges) where ownership changes hands without new capital reaching the company, and the investor lacks active management control [2]. Institutional investors like pension funds and merchant bankers buying listed shares are classified as FPIs, especially when the stake is less than ten percent [4].

Sources

1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.23 Foreign Investment > p. 99
2. [4] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.23 Foreign Investment > p. 98
3. [3] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > FDI may be of two types: > p. 475
4. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > b. Depository Receipt > p. 478