23. FOREGIN INVESTMENTS Flashcards
WHAT DOES FOREGIN INVESTMENT MEANS ?
CAN COMPANY BE A PERSON IN DEFIINATION OF FOREGIN INVESTMENT
WHAT DOES CAPITAL INVESTMENT MEANS
WHAT IS EQUITY SHARES
WHAT IS PREFERENCE SHARE
WHAT IS DEBENTURES
WHAT ARE SHARE BONDS ?
What is foreign investment?
Investment made by a person or entity outside India in capital instruments of an Indian company.
What are capital instruments in foreign investment?
Equity shares, debentures, preference shares, and share warrants.
What are the two main types of foreign investment?
Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI).
What is Foreign Direct Investment (FDI)?
Investment by a foreign entity in an unlisted Indian company or 10% or more in a listed Indian company.
What is Foreign Portfolio Investment (FPI)?
Investment by a foreign entity in less than 10% of the equity capital of a listed Indian company.
Can FPIs invest in bonds?
Yes, FPIs can invest in central and state government securities, corporate bonds, and other debt instruments.
What are the two routes for FDI in India?
The Automatic Route (no government approval needed) and the Government Approval Route (requires approval).
Who regulates FDI policy in India?
The Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce & Industry.
Is RBI approval required for FDI?
No, but companies must report capital inflow and share issuance to RBI.
What is Overseas Direct Investment (ODI)?
When an Indian company invests in a foreign company.
What is the difference between FDI and FPI?
FDI is long-term with ownership control, while FPI is short-term without management influence.
What is a Share Warrant in foreign investment?
A document that gives the holder the right to buy shares at a predetermined price.
What is the sectoral cap in FDI?
A limit on foreign investment in certain sectors, set by the Indian government.
Which country is the largest source of FDI in India?
Singapore, followed by Mauritius and the USA.
Which Indian states receive the most FDI?
Karnataka, Maharashtra, and Delhi.
What is the difference between FDI and FPI in terms of management control?
FDI investors influence company decisions, while FPI investors do not.
What is the role of SEBI in foreign investment?
SEBI regulates FPIs and issues approvals/licenses.
What is a Global Depository Receipt (GDR)?
A financial instrument used by Indian companies to raise funds from foreign investors.
What is an American Depository Receipt (ADR)?
A share issued by a U.S. bank representing shares in an Indian company.
What is External Commercial Borrowing (ECB)?
Loans taken by Indian companies from foreign sources.
What are Masala Bonds?
Bonds issued outside India but denominated in Indian Rupees.
What is the Liberalized Remittance Scheme (LRS)?
It allows Indian residents to remit up to $250,000 per year for overseas investments.
Can a single FPI hold more than 10% in an Indian company?
No, but multiple FPIs together can invest up to the sectoral cap.
What is a Fully Accessible Route (FAR)?
A scheme allowing non-residents to invest in specified Indian government securities without restrictions.
What is a Composite Cap in FDI?
A unified limit that includes both FDI and FPI investments.
What happens if an FDI investment falls below 10%?
It continues to be classified as FDI.
What is the primary objective of FDI?
Long-term investment with active participation in business operations.
What is the primary objective of FPI?
Earning quick returns from stock market fluctuations.
What is the benefit of FDI for an economy?
It brings capital, technology, and employment opportunities.
How does FPI impact exchange rates?
Sudden withdrawal of FPI can lead to currency depreciation.
How does India regulate ECB?
Through the RBI, which sets borrowing limits and end-use restrictions.
What is Foreign Currency Convertible Bonds (FCCB)?
Bonds issued in foreign currency that can be converted into equity.
What is the impact of FDI on employment?
It creates jobs by establishing new businesses or expanding existing ones.
What is the main disadvantage of FPI?
It is highly volatile and can cause financial instability.
What is a Qualified Foreign Investor (QFI)?
A foreign investor allowed to invest directly in Indian mutual funds and equities.
What is the impact of high FDI on the Indian economy?
It boosts GDP growth and infrastructure development.
What is Venture Capital FDI?
Investment in startups and high-growth companies.
Can FDI be negative?
Yes, when foreign investors withdraw investments from a country.
What are the risks of FDI?
Economic dependence, loss of domestic control, and profit repatriation.
What is Greenfield FDI?
Investment in new facilities rather than acquiring existing ones.
