With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic ?
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Answer: B. Foreign Direct Investment usually comes as equity (ownership) in a company, so it does not create debt that must be repaid with interest. That is why FDI is called a largely non-debt creating capital flow.
Watch for: Students confuse FDI with portfolio investment (FPI), which buys listed shares and bonds.
Why the other options are wrong
- A. Wrong because FDI can go into listed or unlisted companies; being listed is not its defining feature.
- C. Wrong because FDI does not involve debt servicing; loans like external commercial borrowings do.
- D. Wrong because investment by foreign institutional investors in government securities is portfolio investment, not FDI.
Source to check: Consolidated FDI Policy, DPIIT (dpiit.gov.in); Economic Survey of India, chapter on external sector
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.