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UPSC 2020: With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?
(a)It is the investment through capital instruments essentially in a listed company.
(b)It is a largely non-debt creating capital flow.
(c)It is the investment which involves debt-servicing.
(d)It is the investment made by foreign institutional investors in the Government securities.
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Not attemptedCorrect Answer: (b) It is a largely non-debt creating capital flow.
FDI represents equity capital, reinvested earnings and intra-company loans that give the investor a lasting management interest; it does not require fixed interest payments and therefore is classified as a largely non-debt-creating capital flow. Options (a), (c) and (d) describe portfolio or debt flows that do entail periodic servicing. ([imf.org](https://www.imf.org/external/pubs/ft/fandd/2006/12/mcdonald.htm?utm_source=openai))
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What is the correct answer to this UPSC 2020 Indian Economy question?▼
The correct answer is option (b): It is a largely non-debt creating capital flow.. 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 2020, GS Paper 1, as Question 51. 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.