Question
Q81.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 a largely non-debt creating capital flow.
C. It is an investment which involves debt-servicing.
D. It is the investment made by foreign institutional investors in the Government securities.
Answer: B
Detailed Explanation
- FDI refers to the purchase of assets in the rest of the world which allows control over the assets, e g, purchase of firms by Reliance in the United States.
- On the recommendation of the Mayaram panel, the following definition for FDI was adopted:
- Any foreign investment equal to or beyond (≥) 10 percent stake in post issue paid-up equity capital on a fully diluted basis in a listed company is construed as EDI.
- Further, any investment in an unlisted entity (even if it is only 1 or 2 percent of paid-up capital) is treated as FDI.
