CA Foundation Exam June 2023 » CA MCQs » FDI in India

FDI in India

MCQs on "FDI in India": Find the multiple choice questions on "FDI in India", frequently asked for all competitive examinations.

The purchase of a stake in a company by a corporation or investor based outside of the country’s borders is known as foreign direct investment (FDI). In general, the term refers to a business decision to purchase a large stake in or the entire business of a foreign company in order to expand its operations into new territory. A stock acquisition in a foreign company is not typically referred to as a “stock buy.”

MCQ (Multiple Choice Question)

Q1) FDI full form:

    1. Foreign development index
    2. Federal department of investigation
    3. Foreign department of investment
    4. Foreign Direct Investment

Ans.) (D) Foreign Direct Investment 

Exp. – (FDI) is foreign direct investment. It is an investment made by a company or individual in a foreign country in a foreign country’s business interests.

Q2) FDI is the formulation policy of which nodal department?

    1. NABARD
    2. SEBI
    3. Department for promotion of industry and internal trade 
    4. RBI

Ans.) (C) Department for promotion of industry and internal trade

Exp.- The Department for promotion of industry and Internal Trade is the nodal department for the creation of foreign direct investment policy (FDI). It is a ministry of commerce and industry-run central government department. It is in charge of the upkeep and management of statistics on inbound FDI into India.

Q3) What is worldwide investment called?

    1. Corporate Fund
    2. Mutual Fund
    3. Foreign investment
    4. Public fund investment

Ans.) (C) Foreign investment

Exp. – Foreign investment refers to money put into multinational corporations from all around the world. It is a financial investment made by a firm or an individual in the business of another country. Foreign direct investment is another name for it.

Q4) FDI in India is allowed by two modes Government route and __?

    1. Automatic route 
    2. Trade route
    3. Bank route
    4. All of the above

Ans.) (A) Automatic Route

Exp. – In India, FDI is permitted through two routes, the automatic route and the government route. Automatic Route does not require government approval.

Q5) What is the maximum amount of FDI in retail that can be brought into India through unrestricted routes?

    1. 55%
    2. 100%
    3. 45%
    4. 25%

Ans.) (B) 100%

Exp. – Foreign companies in particular categories can sell products through their own retail shop in the country, thanks to FDI in the retail industry. The maximum amount of FDI allowed in retail through unrestricted methods is 100 percent.

Q6) Previous work does not limit __?

    1. Joint venture
    2. Franchise
    3. Greenfield project
    4. Strategic alliance

Ans.) (C) Greenfield project

Exp. – Prior work is not a constraint on a greenfield project. These are built on undeveloped property where no current structure needs to be demolished or remodeled.

Q7) Limit of FDI for private security agencies in India?

    1. 74%
    2. 69%
    3. 49%
    4. 19%

Ans.) (A) 74%

Exp. – The Private Security Agencies (Regulation) Act, 2005 regulates foreign direct investment in private security agencies. The FDI cap for private security firms has been raised from 49 percent to 74 percent.

Q8) In foreign trade, an adverse balance of trade occurs when __?

    1. Export < Import
    2. Export = Import
    3. Export > Import
    4. None of the Above

Ans.) (A) Export < Import 

Exp. – The term “balance of trade” refers to the difference between a country’s imports and exports of commodities and services.

Q9) According to India’s FDI policy, 100 percent FDI in equity via the automatic method is not permitted in which of the following areas?

    1. Maintenance and repair organization
    2. Private security agencies 
    3. Industrial Park
    4. Construction development project

Ans.) (B) Private security agencies

Exp. – According to the current FDI policy, foreign investment in the Private Security Agencies Sector is limited to 49 percent and requires “Government Approval.”

Q10) The most popular avenue for MNCs to invest in countries all over the world is through public-private partnerships (PPPs).

    1. new factories to be built
    2. Purchase established local businesses.
    3. create alliances with local businesses
    4. All of the preceding

Ans.) (B) Purchase established local business 

Exp. – MNCs work with some local enterprises to increase production since the rate of production would rapidly increase. MNCs usually buy local businesses and extend their production.

Q11) When can withdrawals of foreign direct investment (FDI) begin?

    1. When corporations try to grow their assets abroad at the end of the business cycle.
    2. When trade liberalisation and industrial regulation are impossible to achieve.
    3. When there are a lot of interest rates and investment prospects.
    4. When company is dominated by domestic investment.

Ans.) (A) When corporations try to grow their assets abroad at the end of the business cycle.

Exp. – When corporations strive to extend their assets abroad at the conclusion of the business cycle, they withdraw foreign direct investment (FDI). When a firm invests in a business entity in another nation, it is known as foreign direct investment (FDI).

Q12) Foreign Institutional Investors (FII) and Foreign Direct Investments (FDI) are both related to investing in a country. Which of the following sentences best exemplifies a key distinction between the two?

    1. FII aids in the development of managerial skills and technology, whereas FDI just brings in capital.
    2. FII aids in the expansion of capital availability in general, whereas FDI only targets specific sectors.
    3. FDI only goes into secondary markets, whereas FII goes into primary markets.
    4. FII is thought to be more reliable than FDI.

Ans.) (B) FII aids in the expansion of capital availability in general, whereas FDI only targets specific sectors.

Exp. – Foreign Direct Investment (FDI) is described as an investment by a company based in another country into a country’s production or business. Foreign Institutional Investment (FII) is a type of investment fund that is based in a country other than the one where the investment is being made.

Q13) The Indian government declared in November 2015 that FDI in ‘News and current affairs networks’ would be increased from 26 percent to .

    1.  49 percent
    2.  51 percent 
    3. 100 percent
    4.  75 percent 

Ans.) (A) 49 percent 

Exp. – Uplinking of news and current affairs TV channels has grown from 26 percent to 49 percent in the wake of a recent decision to allow 100 percent foreign direct investment (FDI) in DTH and cable networks (MSOs and LCOs).

Q14) Globalisation has seen dramatic changes in the last two decades in __?

    1. between countries in terms of products, services, and people
    2. international trade in products, services, and investments
    3. Between countries, products, investments, and people are exchanged.
    4. None of the preceding

Ans.) (B) International trade in products, services, and investments

Exp. – Globalization has resulted in accelerated movement of commodities, services, and investments among countries over the last two decades. The level of living of  consumers has improved as a result of this.

Q15) __ is foreign direct investment ?

    1. Tangible goods
    2. Intangible goods
    3. Intellectual properties
    4. Human resources 

Ans.) (A) Tangible goods

Exp. – Physical assets or property owned by a corporation, such as computer equipment, are examples of tangible assets. Therefore FDI includes Tangible goods.

Q16) Foreign direct investment (FDI) increase can help __

    1. Circulation of money
    2. Unemployment
    3. Supply
    4. Employment 

Ans.) (D) Employment 

Exp. – As FBI gives various work opportunities to the people which results in employment.

Q17) An _____ is a financial investment made by a company or individual in another country’s business interests.

    1. RBI
    2. FDI
    3. SEZ
    4. CRR

Ans.) (B) FDI 

Exp. – A circumstance in which a foreign entity gets ownership or control rights over the shares of a firm in a country or forms a corporation in that country is referred to as foreign direct investment (FDI).

Q18) Ministry of India needs to decide on FDI Proposal application in how many days ?

    1. 70 days
    2. 50 days
    3. 45 days
    4. 60 days 

Ans.) (D) 60 Days 

Exp. – Government of India on 6th June 2017 stated proposals of FDI should be  decided within 60 days of application.

Q19) The _______ is the difference between a country’s imports and exports of goods and services.

    1. Balance of items
    2. depreciation
    3. International Trade
    4. Export-Import Balance

Ans.) (D) Export Import balance 

Exp. – The term export-import balance refers to the difference between a country’s imports and exports of commodities and services.

Q20) __ is an investment fund that is based in a country other than the one where the investment is made.

    1. Foreign Institutional Investment 
    2. Foreign Trade Investment
    3. Forex 
    4. Foreign Trade Investment 

Ans.) (A) Foreign Institutional Investment 

Exp. – Foreign Institutional Investment (FII) is a type of investment fund that is based in a country other than the one where the investment is made. FII only invests in the secondary market. FII does not have a specific company to target.