FDI and FPI: types, costs and benefits, trends, India’s FDI policy - One Line Questions

1. What is an example of 'backward vertical FDI'? — A car manufacturer acquiring a foreign company that supplies car parts.
2. What is the main characteristic of horizontal FDI? — A company invests in its own industry in a foreign country.
3. Vertical FDI occurs when a company invests in a foreign business that is: — Part of the company's value chain (e.g., supplier or distributor).
4. What is a key 'trend' in global FDI flows in recent years? — A rise in intra-regional FDI and FDI in services and digital sectors.
5. Which of the following best describes Foreign Direct Investment (FDI)? — An investment made by a company or individual in one country into business interests located in another country.
6. What is a significant 'trend' observed in FDI flows towards developing economies like India? — Increased focus on digital infrastructure and services.
7. An example of 'forward vertical FDI' would be: — A smartphone manufacturer acquiring a foreign company that distributes its phones.
8. India's policy has gradually liberalized FDI, moving many sectors from the 'government approval route' to the 'automatic route'. This indicates: — An effort to simplify and attract more foreign investment.
9. A 'Greenfield Investment' in FDI refers to: — Building new facilities from the ground up in a foreign country.
10. India's policy on FDI in multi-brand retail trading has been a subject of debate, often involving: — Restrictions on the number of outlets and sourcing norms.
11. What does the 'Trends' aspect of FDI policy analysis entail? — Understanding the direction, magnitude, and sectoral distribution of FDI flows.
12. What is the role of the Reserve Bank of India (RBI) in India's FDI policy? — Administering and regulating the inflow of foreign investment as per the policy.
13. What is a common driver behind the 'trends' of increasing FDI in the services sector? — Globalization of service delivery through digital technologies.
14. The 'trends' in FDI inflows into India are often influenced by: — Global economic conditions and India's ease of doing business reforms.
15. Which of the following is a potential 'cost' of FDI for the investing company? — Exposure to political instability and regulatory changes in the host country.
16. What is a potential 'cost' associated with large-scale FDI inflows into India? — Pressure on domestic small and medium enterprises (SMEs).
17. What distinguishes FDI from Foreign Portfolio Investment (FPI)? — FDI involves a long-term strategic interest and control, while FPI is a passive investment.
18. What is the 'automatic route' for FDI in India? — FDI that does not require prior approval from the government or the Reserve Bank of India.
19. What does FDI stand for in the context of international business? — Foreign Direct Investment
20. Which type of FDI involves a domestic company acquiring an existing foreign company? — Merger and Acquisition (M&A)
21. Which of the following is NOT a type of FDI? — Portfolio Investment
22. A company establishing a new manufacturing plant in India is an example of: — Greenfield Investment
23. Investing in a foreign supplier's business is typically classified as: — Backward Vertical FDI
24. The 'costs' of FDI can be mitigated for the host country by: — Ensuring effective regulation and promoting linkages with domestic firms.
25. Which of the following is a benefit of FDI for the host country? — Transfer of technology and managerial expertise.
26. The 'costs' of FDI for the host country are often related to: — Potential balance of payments issues due to profit repatriation.
27. What is a potential cost or risk of FDI for the host country? — Potential exploitation of labor and resources.
28. What is a common 'benefit' of FDI for India's economy? — Development of domestic industries through competition and technology.
29. A 'cost' for the host country from FDI could be: — Potential repatriation of profits which leads to capital outflow.
30. The 'benefits' of FDI for the investing company primarily include: — Access to new markets, resources, and potentially lower costs.
31. Which of the following is a 'benefit' of FDI for the host country's industrial development? — Development of ancillary industries and supply chains.
32. What is a key 'benefit' of FDI for the host country's labor market? — Creation of new job opportunities, often with better skills.
33. India's FDI policy generally prohibits investment in: — Lottery, gambling, and betting
34. For the investing company, a potential benefit of FDI is: — Access to cheaper labor and raw materials.
35. Which of the following is a 'benefit' of FDI for the investing country? — Access to new markets and resources.
36. For the investing company, a significant cost of FDI can be: — High initial capital outlay and exposure to political risk.
37. Which government body in India is primarily responsible for administering FDI policy? — Ministry of Commerce and Industry (Department for Promotion of Industry and Internal Trade - DPIIT)
38. Which of the following sectors in India currently allows 100% FDI under the automatic route? — E-commerce (marketplace model)
39. The 'trends' in FDI are often influenced by: — Increased protectionist policies and geopolitical uncertainties.
40. India's 'FDI policy' aims to: — Encourage foreign investment in specific sectors to boost economic growth.
41. Which factor is crucial for the 'benefits' of FDI to be fully realized in the host country? — A stable macroeconomic environment and supportive policy framework.
42. Under India's FDI policy, what does the term 'sectors under government approval route' signify? — Sectors where FDI requires prior approval from the relevant government ministry.
43. India's 'FDI policy' has been evolving to encourage investment in: — Sunrise sectors and areas promoting 'Make in India'.
44. Which region has generally seen a substantial inflow of FDI due to its large consumer market and growing economy? — Asia
45. What does the 'cost of capital' refer to in the context of FDI? — The rate of return expected by investors on their foreign investment.
46. Which factor significantly influences the 'benefits' of FDI for the host country? — The extent of technology transfer and skill development facilitated by the FDI.
47. The 'trends' in FDI are closely monitored by policymakers because they indicate: — Investor confidence and the attractiveness of an economy.
48. What does the 'FDI ceiling' typically refer to in India's policy? — The maximum percentage of ownership allowed for foreign investors in a particular sector.
49. What is a key objective of India's 'FDI policy' regarding technology? — To encourage the inflow of advanced technology and foster innovation.
50. What is the primary motivation for a company to undertake FDI? — To gain control over foreign operations and assets.
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