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

examrobotsa's picture

Submitted by examrobotsa on

Q: 59 (CDS-I/2022)

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

question_subject: 

Economics

question_exam: 

CDS-I

stats: 

0,254,147,93,26,28,254

keywords: 

{'foreign direct investment': [0, 0, 2, 7], 'foreign country pension fund': [0, 0, 0, 1], 'foreign company': [0, 0, 0, 2], 'foreign entity': [0, 0, 0, 1], 'indian stock markets': [0, 0, 0, 1], 'foreign merchant banker': [0, 0, 0, 1], 'stock exchanges': [0, 0, 0, 1], 'shares': [0, 3, 3, 6], 'india': [8, 1, 7, 13], 'educational institution': [0, 0, 0, 4]}

Foreign Direct Investment (FDI) refers to the investment made by a foreign entity in a country`s economy. It involves a long-term commitment and is typically associated with the establishment of a business or the acquisition of a substantial amount of ownership in an existing enterprise.

Option 1, where a foreign company buys shares in stock exchanges in India, does not qualify as FDI. This is because buying shares in the stock market does not involve a direct investment in the Indian economy.

Option 2, where a foreign country pension fund invests in Indian stock markets, also does not qualify as FDI. Investing in stock markets is considered portfolio investment, which does not involve a direct stake in the Indian economy.

Option 3, where a foreign merchant banker buys shares from Indian stock markets, is also not considered FDI. Similar to option 1, this is a form of portfolio investment rather than a direct investment in the Indian economy.

The correct answer is option 4, where a foreign entity sets up an educational institution in India. This is considered FDI because it involves a long-term commitment and the establishment of a business in the Indian economy.