Question Bank - General Knowledge

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Which one of the following would be considered as Foreign Direct Investment?

A.
A foreign company buying shares in stock exchanges in India
B.
A foreign country pension fund investing in Indian stock markets
C.
A foreign merchant banker buying shares from Indian stock markets
D.
A foreign entity setting up an educational institution in India

Solution:

The correct answer is Option 4.Foreign direct investment (FDI)It is an investment made by a firm or individual in one country into business interests located in another country.FDI is different from foreign portfolio investment where the foreign entity merely buys equity shares of a company.The following include FDIs-Subsidiaries of foreign companies in India.Majority of foreign equity holding in Indian companies.Day to Day operations of the company.It is a major source of nondebt financial resources.Companies are exclusively financed by foreign companies.Therefore, A foreign entity setting up an educational institution in India is FDI. Hence, Option 4 is correct.There are a few industries where FDI is strictly prohibited under any route. These industries areAtomic Energy GenerationAny Gambling or Betting businessesLotteries (online, private, government, etc)Investment in Chit FundsNidhi CompanyAgricultural or Plantation ActivitiesTrading in TDRsCigars, Cigarettes, or any related tobacco industry

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