Which one of the following best describes a major characteristic of Foreign Direct Investment (FDI) into India?

Question

Accepted Answer

B. It is largely a non-debt-creating capital flow. FDI is largely a non-debt-creating capital flow, distinguishing it from debt-creating inflows such as external commercial borrowing or foreign investment in debt securities, which must eventually be repaid with interest. It is also fundamentally different from short-term portfolio investment, since FDI typically involves a lasting management interest in an enterprise rather than trading in listed shares, ruling out option C. FDI is also not routed exclusively government-to-government, it flows through private companies and investors as well, ruling out option D. Hence option B correctly captures FDI's defining characteristic.

Answer

A. It is a form of debt that must be repaid with interest, similar to external commercial borrowing

Answer

B. It is largely a non-debt-creating capital flow

Answer

C. It consists mainly of short-term portfolio investment in listed equities

Answer

D. It is routed exclusively through a government-to-government channel