Which of the following would include Foreign Direct Investment in India? 1. Subsidiaries of companies in India 2. Majority of foreign equity holding in Indian companies 3. Companies exclusively financed by foreign companies 4. Portfolio investment Select the correct answer using the codes given below:

QUESTION

Easy

Economy

Prelims 2012

Which of the following would include Foreign Direct Investment in India?

Subsidiaries of companies in India
Majority of foreign equity holding in Indian companies
Companies exclusively financed by foreign companies
Portfolio investment

Select the correct answer using the codes given below:

Select an option to attempt

Explanation

Statement 1 is Correct: Foreign Direct Investment (FDI) includes the establishment of subsidiaries by foreign parent companies in India, as it represents a lasting interest and management control. Statement 2 is Correct: FDI involves acquiring a significant or majority stake in the equity of a domestic company to exercise control over its business operations. Statement 3 is Correct: Companies that are exclusively financed or 100% owned by foreign entities (Wholly Owned Subsidiaries) are a primary form of FDI. Statement 4 is Incorrect: Portfolio investment (FPI) refers to the purchase of financial assets like stocks and bonds for short-term gains without seeking long-term management control, which distinguishes it from FDI.

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