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UPSC 2002: Global capital flows to developing countries increased significantly during the nineties. In view of the East Asian financial crisis and the Latin American experience, which type of inflow is considered safest for the host country?
(a)Commercial loans
(b)Foreign Direct Investment
(c)Foreign Portfolio Investment
(d)External Commercial Borrowings
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Not attemptedCorrect Answer: (b) Foreign Direct Investment
Foreign Direct Investment represents long-term ownership of productive assets and cannot be withdrawn overnight, making host economies less vulnerable than with volatile portfolio flows or debt-creating commercial loans/ECBs. Following crises in East Asia and Latin America, FDI is therefore regarded as the safest inflow, so option (b) is correct.
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What is the correct answer to this UPSC 2002 Indian Economy question?▼
The correct answer is option (b): Foreign Direct Investment. Watch the detailed video explanation in our Sherlocking Prelims course on UnlockIAS.
Which year was this External Sector & Balance Of Payments question asked in UPSC Prelims?▼
This question was asked in UPSC CSE Prelims 2002, GS Paper 1, as Question 70. It falls under Indian Economy > External Sector & Balance Of Payments.
What is the difficulty level of this UPSC question?▼
This question is rated "easy". It tests basic recall and most well-prepared aspirants should answer it correctly.
How many UPSC Prelims questions have been asked from External Sector & Balance Of Payments?▼
UPSC has asked 49 questions from External Sector & Balance Of Payments (under Indian Economy) across multiple years. Visit the topic page to see the full list and year-wise trends.