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Indian EconomyEasyAsked in: UPSC Civil Services · CSE Prelims 2020, GS Paper I

With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?

  1. A.It is the investment through capital instruments essentially in a listed company.
  2. B.It is a largely non-debt creating capital flow.
  3. C.It is the investment which involves debt-servicing.
  4. D.It is the investment made by foreign institutional investors in the Government securities.

Correct answer

B. It is a largely non-debt creating capital flow.

Explanation

The correct answer is B, It is a largely non-debt creating capital flow. FDI comes in as equity ownership, so India does not have to repay it with interest.

Under Indian rules, FDI is investment by a person resident outside India in an unlisted company, or in ten per cent or more of the paid-up equity of a listed company. The investor takes a lasting stake and a say in management, and earns through profits and dividends rather than fixed interest. Because it creates no repayment obligation and tends to stay through bad years, FDI is treated as a more stable source of foreign capital than loans or short-term portfolio money.

A is wrong: FDI can go into unlisted companies too, and a small stake in a listed company counts as portfolio investment. C is wrong: debt-servicing is a feature of external borrowing, not equity. D is wrong: purchases of government securities by foreign institutional investors are portfolio investment, not FDI.

Exam tip: FDI = 10% or more stake, lasting control, non-debt; FPI = below 10%, quick to leave.

Practice Questions

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Q1.Indian EconomyAsked in: UPSC Civil Services · CSE Prelims 2020, GS Paper IHard

In India, which of the following can be considered as public investment in agriculture?

1. Fixing Minimum Support Price for agricultural produce of all crops

2. Computerization of Primary Agricultural Credit Societies

3. Social Capital development

4. Free electricity supply to farmers

5. Waiver of agricultural loans by the banking system

6. Setting up of cold storage facilities by the governments

Select the correct answer using the code given below :

  1. A.1, 2 and 5 only
  2. B.1, 3, 4 and 5 only
  3. C.2, 3 and 6 only
  4. D.1, 2, 3, 4, 5 and 6
Show answer
Correct answer: C. 2, 3 and 6 only

Public investment means government spending that creates lasting assets or capacity, while support prices, free power and loan waivers are subsidies or transfers.

Q2.Indian EconomyAsked in: UPSC Civil Services · CSE Prelims 2025, GS Paper IHard

Consider the following activities :

I. Production of crude oil

II. Refining, storage and distribution of petroleum

III. Marketing and sale of petroleum products

IV. Production of natural gas

How many of the above activities are regulated by the Petroleum and Natural Gas Regulatory Board in our country?

  1. A.Only one
  2. B.Only two
  3. C.Only three
  4. D.All the four
Show answer
Correct answer: B. Only two

The Petroleum and Natural Gas Regulatory Board covers the downstream chain, refining to sale, but not the production of crude oil and natural gas.

Q3.Indian EconomyAsked in: CDS · CDS-II 2019, GKMedium

Which one of the following equals Personal Disposable Income ?

  1. A.Personal Income - Direct taxes paid by households and miscellaneous fees, fines, etc.
  2. B.Private Income - Saving of Private Corporate Sectors - Corporation Tax
  3. C.Private Income - Taxes
  4. D.Total expenditure of Households - Income Tax - Gifts received
Show answer
Correct answer: A. Personal Income - Direct taxes paid by households and miscellaneous fees, fines, etc.

In national income accounting the steps run from private income to personal income to personal disposable income. Private income is the factor income of the private sector plus transfers.

Q4.Indian EconomyAsked in: UPSC Civil Services · CSE Prelims 2025, GS Paper IHard

With reference to India, consider the following pairs:

Organization : Union Ministry

I. The National Automotive Board : Ministry of Commerce and Industry

II. The Coir Board : Ministry of Heavy Industries

III. The National Centre for Trade Information : Ministry of Micro, Small and Medium Enterprises

How many of the above pairs are correctly matched?

  1. A.Only one
  2. B.Only two
  3. C.All the three
  4. D.None
Show answer
Correct answer: D. None

Each organisation is paired with the wrong ministry. The National Automotive Board works under the Ministry of Heavy Industries; it supports the automobile sector with testing and certification work and helps run schemes for the industry.

Q5.Indian EconomyAsked in: UPSC Civil Services · CSE Prelims 2020, GS Paper IMedium

If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do?

1. Cut and optimize the Statutory Liquidity Ratio

2. Increase the Marginal Standing Facility Rate

3. Cut the Bank Rate and Repo Rate

Select the correct answer using the code given below:

  1. A.1 and 2 only
  2. B.2 only
  3. C.1 and 3 only
  4. D.1, 2 and 3
Show answer
Correct answer: B. 2 only

An expansionist policy aims to make money cheaper and more plentiful, so the RBI would not raise the Marginal Standing Facility rate, which makes borrowing dearer.