Foreign Investments in India play a pivotal role in shaping the nation’s economic landscape. From understanding FDI policies to exploring key sectors attracting global funds, there’s much to learn. This article, Foreign Investments in India GK MCQs With Answer & Explanation in English, is crafted to provide you with insightful questions and detailed answers that not only test your knowledge but also offer a deeper understanding of how foreign investments impact India’s growth story.
Dive in to enhance your expertise on this crucial subject!
1. What is the meaning of the “Government Route” in Foreign Investments?
- Investments can be made only with prior permission of the Government or Government authorities.
- Investments can be made only in partnership with the Government or Government Companies.
- Investment can be made only in the Government Companies.
- Investment can be made only via a Foreign Government Body in India.
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Answer: Investments can be made only with prior permission of the Government or Government authorities.
The “Government Route” in foreign investments refers to the process or mechanism through which foreign investments can be made in a country only with prior permission from the government or government authorities. This means that any foreign entity or individual looking to invest in certain sectors or under specific conditions must seek approval from the government before proceeding with the investment. The government route is typically used to regulate and monitor investments in sectors that are considered sensitive, strategic, or have an impact on national security or public interest.
2. From time to time, which among the following body publishes the “Exchange Control Manual” in context with the Foreign Exchange in India?
- Foreign Trade Promotion Board
- Today
- Department of Commerce
- Reserve Bank of India
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Answer: Reserve Bank of India
The “Exchange Control Manual” in the context of Foreign Exchange in India is published by the Reserve Bank of India (RBI). This manual provides comprehensive guidelines, rules, and regulations related to foreign exchange transactions in India. It covers various aspects, including foreign currency management, trade credits, capital transactions, and exchange control procedures. The RBI regularly updates the manual to ensure compliance with current foreign exchange regulations.
3. What do we call an arrangement whereby an issuing Bank at the request of the Importer (Buyer) undertakes to make payment to the exporter (Beneficiary) against stipulated documents?
- Bill of Exchange
- Letter of Exchange
- Letter of Credit
- Bill of Entry
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Answer: Letter of Credit
The arrangement whereby an issuing Bank at the request of the Importer (Buyer) undertakes to make payment to the exporter (Beneficiary) against stipulated documents is called a “Letter of Credit.”
4. Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) are distinct in terms of?
- FDI brings capital, technology & management and FII brings only capital
- FDI targets specific sectors and FII helps in increasing foreign capital availability
- FII is considered more stable
- FII targets both primary and secondary markets while FDI targets only primary.
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Answer: FDI brings capital, technology & management and FII brings only capital
Foreign Direct Investment (FDI) brings capital, technology, and management to the invested company, while Foreign Institutional Investment (FII) brings only capital. FDI involves a long-term interest in a foreign business entity and often results in a significant level of control and influence in the invested company. In contrast, FII involves the purchase of financial assets like stocks and bonds, reflecting a short-term or portfolio investment approach with limited influence over the company’s operations.
5. As of now, there is no FDI in India, in which of the above sectors?
1. Real Estate Investment Trust
2. Railway operation
3. Atomic Energy
Choose the right option;
- 1 Only
- 1 & 2 Only
- 1, 2 & 3
- None
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Answer: 1, 2 & 3
FDI is prohibited in certain sectors in India, including lottery, gambling, atomic energy, Real Estate Investment Trust (REIT), and railway operations. These restrictions are in place to safeguard national interests, security, and regulatory concerns. Foreign investments in these sectors require specific approvals and are subject to various conditions.
6. Which of the following reports is/are published by the World Bank?
1. Global Innovation Index
2. Global Competitiveness Index
3. Ease of doing business index
Choose the right option
- 2 & 3 Only
- 3 Only
- 1, 2 & 3
- None
Show Answer
Answer: 3 Only
The Global Innovation Index is published by Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO). This index ranks and assesses the innovation capabilities and performances of countries worldwide. It evaluates factors such as research and development, technology, and intellectual property rights to provide insights into a country’s innovation ecosystem.
7. How much Foreign Direct Investment (FDI) is allowed in e-commerce?
- 75%
- 60%
- 100%
- 51%
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Answer: 100%
Foreign Direct Investment (FDI) in e-commerce is allowed up to 100% in the marketplace model (B2B models) in India. In the marketplace model, e-commerce platforms act as intermediaries connecting buyers and sellers but do not own the inventory of goods. This liberalization has opened opportunities for foreign investors to participate in India’s growing e-commerce sector.
8. What is the percentage of Foreign Direct Investment (FDI) allowed in the Poultry sector under the automatic route?
- 100%
- 70%
- 51%
- 49%
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Answer: 100%
The Indian government allows 100% foreign direct investment in the poultry sector through the automatic route. This means that foreign investors can invest up to 100% of the equity in poultry-related businesses without requiring prior government approval. The automatic route simplifies and expedites the process for foreign investors in this sector.
9. What is the maximum percentage of Foreign Direct Investment (FDI) allowed in the food processing industry in India?
- 50%
- 51%
- 25%
- 100%
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Answer: 100%
The Indian government also allows 100% foreign direct investment in food processing units. This policy supports the development of food processing infrastructure and technology, encouraging foreign investors to participate in India’s food processing industry.
10. Who releases the FDI Confidence Index?
- German Watch
- A.T. Kearney
- World Economic Forum
- UNCTAD
Show Answer
Answer: A.T. Kearney
The FDI Confidence Index is prepared by A.T. Kearney. It is an annual survey that tracks the impact of likely political, economic, and regulatory changes on the foreign direct investment intentions and preferences of CEOs, CFOs, and other top executives of Global 1000 companies. This index provides valuable insights into global investor sentiment and their willingness to invest in different countries based on various factors.
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