23. FOREGIN INVESTMENTS

Question 1

WHAT DOES FOREGIN INVESTMENT MEANS ?

Answer 1

Question 2

CAN COMPANY BE A PERSON IN DEFIINATION OF FOREGIN INVESTMENT

Answer 2

Question 3

WHAT DOES CAPITAL INVESTMENT MEANS

Answer 3

Question 4

WHAT IS EQUITY SHARES

Answer 4

Question 5

WHAT IS PREFERENCE SHARE

Answer 5

Question 6

WHAT IS DEBENTURES

Answer 6

Question 7

WHAT ARE SHARE BONDS ?

Answer 7

Question 9

What is foreign investment?

Answer 9

Investment made by a person or entity outside India in capital instruments of an Indian company.

Question 10

What are capital instruments in foreign investment?

Answer 10

Equity shares, debentures, preference shares, and share warrants.

Question 11

What are the two main types of foreign investment?

Answer 11

Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI).

Question 12

What is Foreign Direct Investment (FDI)?

Answer 12

Investment by a foreign entity in an unlisted Indian company or 10% or more in a listed Indian company.

Question 13

What is Foreign Portfolio Investment (FPI)?

Answer 13

Investment by a foreign entity in less than 10% of the equity capital of a listed Indian company.

Question 14

Can FPIs invest in bonds?

Answer 14

Yes, FPIs can invest in central and state government securities, corporate bonds, and other debt instruments.

Question 15

What are the two routes for FDI in India?

Answer 15

The Automatic Route (no government approval needed) and the Government Approval Route (requires approval).

Question 16

Who regulates FDI policy in India?

Answer 16

The Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce & Industry.

Question 17

Is RBI approval required for FDI?

Answer 17

No, but companies must report capital inflow and share issuance to RBI.

Question 18

What is Overseas Direct Investment (ODI)?

Answer 18

When an Indian company invests in a foreign company.

Question 19

What is the difference between FDI and FPI?

Answer 19

FDI is long-term with ownership control, while FPI is short-term without management influence.

Question 20

What is a Share Warrant in foreign investment?

Answer 20

A document that gives the holder the right to buy shares at a predetermined price.

Question 21

What is the sectoral cap in FDI?

Answer 21

A limit on foreign investment in certain sectors, set by the Indian government.

Question 22

Which country is the largest source of FDI in India?

Answer 22

Singapore, followed by Mauritius and the USA.

Question 23

Which Indian states receive the most FDI?

Answer 23

Karnataka, Maharashtra, and Delhi.

Question 24

What is the difference between FDI and FPI in terms of management control?

Answer 24

FDI investors influence company decisions, while FPI investors do not.

Question 25

What is the role of SEBI in foreign investment?

Answer 25

SEBI regulates FPIs and issues approvals/licenses.

Question 26

What is a Global Depository Receipt (GDR)?

Answer 26

A financial instrument used by Indian companies to raise funds from foreign investors.

Question 27

What is an American Depository Receipt (ADR)?

Answer 27

A share issued by a U.S. bank representing shares in an Indian company.

Question 28

What is External Commercial Borrowing (ECB)?

Answer 28

Loans taken by Indian companies from foreign sources.

Question 29

What are Masala Bonds?

Answer 29

Bonds issued outside India but denominated in Indian Rupees.

Question 30

What is the Liberalized Remittance Scheme (LRS)?

Answer 30

It allows Indian residents to remit up to $250,000 per year for overseas investments.

Question 31

Can a single FPI hold more than 10% in an Indian company?

Answer 31

No, but multiple FPIs together can invest up to the sectoral cap.

Question 32

What is a Fully Accessible Route (FAR)?

Answer 32

A scheme allowing non-residents to invest in specified Indian government securities without restrictions.

Question 33

What is a Composite Cap in FDI?

Answer 33

A unified limit that includes both FDI and FPI investments.

Question 34

What happens if an FDI investment falls below 10%?

Answer 34

It continues to be classified as FDI.

Question 35

What is the primary objective of FDI?

Answer 35

Long-term investment with active participation in business operations.

Question 36

What is the primary objective of FPI?

Answer 36

Earning quick returns from stock market fluctuations.

Question 37

What is the benefit of FDI for an economy?

Answer 37

It brings capital, technology, and employment opportunities.

Question 38

How does FPI impact exchange rates?

Answer 38

Sudden withdrawal of FPI can lead to currency depreciation.

Question 39

How does India regulate ECB?

Answer 39

Through the RBI, which sets borrowing limits and end-use restrictions.

Question 40

What is Foreign Currency Convertible Bonds (FCCB)?

Answer 40

Bonds issued in foreign currency that can be converted into equity.

Question 41

What is the impact of FDI on employment?

Answer 41

It creates jobs by establishing new businesses or expanding existing ones.

Question 42

What is the main disadvantage of FPI?

Answer 42

It is highly volatile and can cause financial instability.

Question 43

What is a Qualified Foreign Investor (QFI)?

Answer 43

A foreign investor allowed to invest directly in Indian mutual funds and equities.

Question 44

What is the impact of high FDI on the Indian economy?

Answer 44

It boosts GDP growth and infrastructure development.

Question 45

What is Venture Capital FDI?

Answer 45

Investment in startups and high-growth companies.

Question 46

Can FDI be negative?

Answer 46

Yes, when foreign investors withdraw investments from a country.

Question 47

What are the risks of FDI?

Answer 47

Economic dependence, loss of domestic control, and profit repatriation.

Question 48

What is Greenfield FDI?

Answer 48

Investment in new facilities rather than acquiring existing ones.