SSC CGL 2024 Tier-I · 9 September 2024, Shift 1 · General Awareness · Question 20 of 100

Text as printed on a candidate's response sheet for this shift; answer per SSC's tentative key as marked on that sheet. Solution last reviewed 6 September 2026.

Where this paper and its answers come from

SSC does not publish CGL question papers or a public answer key. The questions and options here are reproduced as printed on a candidate's own response sheet for this shift — the Commission's text, unchanged. Each answer is SSC's tentative key as marked on that sheet; SSC allowed challenges to it and never publishes a final key. The solutions are written by UnlockIAS.

What challenge does foreign investment often face in India?

(a)Excessive foreign competition
(b)Lack of skilled labour
(c)Lack of consumer base
(d)Inconsistent regulatory environment

Answer

Why

Correct — D. An inconsistent regulatory environment is what the stem is after. Rules that shift, differ between states or reach backwards make a long-lived investment hard to price.

The best-documented instance is the retrospective tax amendment of 2012, which India withdrew through the Taxation Laws (Amendment) Act, 2021, because of the damage it had done to investor confidence.

Add approvals split between the Centre, the states and local bodies, and the cost of a foreign project turns as much on regulation as on demand.

Why the others are wrong

(a)
Excessive foreign competition — Excessive foreign competition is a complaint of domestic firms facing new entrants, not an obstacle the foreign investor meets. The stem asks from the investor's side.
(b)
Lack of skilled labour — Skill gaps exist in particular trades, but a shortage of workers is not what deters investment in a country whose large young workforce is itself an attraction.
(c)
Lack of consumer base — A lack of consumer base is the opposite of the case. A domestic market of well over a billion people is among the main things India advertises to foreign investors.

Concept

Foreign money reaches India in two forms. FDI is a lasting stake with a say in management, while FPI is portfolio money in shares and bonds that can leave quickly.

FDI enters by one of two routes. The automatic route needs no prior approval, and the government route needs clearance from the ministry concerned.

What an investor prices is not only the return but the predictability - how long approvals take, whether a rule can change after the money is committed, and how disputes are settled.

That is why regulatory stability is discussed alongside land, labour and infrastructure as a determinant of investment.

This is an opinion-style stem rather than a recall one, so it expects the textbook framing of the problem instead of a contested judgement.

Key facts

FDI enters India either by the automatic route or by the government-approval route.
India withdrew the 2012 retrospective tax amendment through the Taxation Laws (Amendment) Act, 2021.
FDI is a lasting management stake, while FPI is portfolio investment that can be pulled out quickly.

Study next

FDI routes and sectoral caps, including the sectors closed to foreign investmentDifference between foreign direct investment and foreign portfolio investmentEase of doing business reforms and single-window clearance

Common traps

Reading the stem from the domestic industry's point of view, where foreign competition is the grievance.
Choosing lack of consumer base when market size is India's strongest selling point.

Foreign investment appears both as policy recall and as a judgement stem like this one - also asked 11 Sep 2024, 12:30, GA Q.24 (automatic approval of FDI up to 74 per cent) and 13 Sep 2024, 16:00, GA Q.3 (objectives of the Industrial Policy Statement, 1980).

Related PYQs

No directly related past PYQ was found.