UPSC CSE Prelims
Question 92
With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?
View correct answer and explanation
Correct answer: B
Correct Option: B (It is largely non-debt creating capital flow.)
Explanation: Foreign Direct Investment is equity/control-oriented cross-border investment and is generally non-debt-creating, unlike sovereign or corporate loans that require interest and principal servicing.
Option-wise Analysis:
A. Incorrect - FDI need not be confined to listed companies; foreign portfolio flows often involve listed securities.
B. Correct - FDI principally represents investment capital rather than contractual external debt.
C. Incorrect - Debt-service obligations characterise borrowing, not equity-based FDI.
D. Incorrect - Foreign institutional purchases of government securities are portfolio investment, not FDI.