UPSC Prelims 2012·GS1·economy·open economy

Which of the following would include Foreign Direct Investment in India? 1. Subsidiaries of foreign companies in India 2. Majority 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:

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Last updated 23 May 2026, 3:31 pm IST
  1. A1, 2, 3 and 4
  2. B2 and 4 only
  3. C1 and 3 only
  4. D1, 2 and 3 onlyCorrect

Explanation

Foreign Direct Investment FDI refers to an investment made by a foreign entity to acquire a lasting interest and significant control over an enterprise operating in India. Statement 1 is correct because subsidiaries are branches or entities where a foreign parent company has a controlling stake. Statement 2 is correct because majority equity holding implies control and management participation by the foreign investor. Statement 3 is correct because companies fully or exclusively funded by foreign entities fall under the category of FDI through 100 percent ownership. Statement 4 is incorrect because Portfolio Investment, such as Foreign Portfolio Investment FPI, refers to passive investment in financial assets like stocks and bonds without providing the investor with direct control or management of the company. These are generally short term and speculative in nature, distinguishing them from FDI. Therefore, since statements 1, 2, and 3 are forms of FDI while statement 4 is not, option D is the correct answer.
economy: Which of the following would include Foreign Direct Investment in India? 1. Subsidiaries of foreign companies in India 2
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