MasteryExams
Economics • Indian EconomyEasy

Which of the following defines 'FDI (Foreign Direct Investment)' distinguishing it from FPI (Foreign Portfolio Investment)?

A. FDI involves acquiring a lasting interest and significant management control in a domestic enterprise✓ Correct Answer
B. FDI is strictly restricted to government-owned bonds and treasury bills
C. FDI can be withdrawn instantaneously from domestic stock exchanges without regulatory notice
D. FDI refers exclusively to short-term speculative capital inflows

💡 Solution & Explanation

Foreign Direct Investment involves a resident entity in one country acquiring a lasting interest and significant management control in an enterprise operating in another economy, distinguishing it from portfolio investments that lack operational control. FPI involves purchasing stocks, bonds, or other financial assets passively and can be withdrawn quickly from domestic markets.

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