With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?
Correct Answer: Option B
Foreign Direct Investment (FDI) in India refers to investments made by a non-resident entity or a person resident outside India into the capital of an Indian company, as per the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017.
Such investment is made through capital instruments in:
- An unlisted Indian company.
- 10% or more of the post-issue paid-up equity capital on a fully diluted basis of a listed Indian company.
Therefore, the investment is not essentially only in a listed company.
FDI can be made in equities, equity-linked instruments, or debt instruments issued by the company. Thus, FDI isn’t directly associated with government securities and involves the transfer of technology, skills, and knowledge.
Debt servicing refers to the regular repayment of interest and principal on a debt over a specific period. FDI is largely a non-debt creating capital flow, where there is no direct repayment obligation for the residents.
Hence, option (b) is correct.