29.Foreign Direct Investments (FDI) (Part 2)

Question 1

Which sector is prohibited for FDI in India related to lotteries?

Answer 1

Lottery business (Including government/private lottery, online lotteries, etc)

Question 2

What is a prohibited activity in terms of FDI in India related to gambling?

Answer 2

Gambling and Betting including casinos.

Question 3

Which type of business is not allowed for FDI in India?

Answer 3

Business of chit fund

Question 4

Which company type is prohibited for FDI in India?

Answer 4

Nidhi company

Question 5

Name one sector that is not open to private sector investment in India.

Answer 5

Activities/sectors not open to private sector investment (e.g., atomic energy/railways)

Question 6

What type of retail trading is prohibited for FDI in India?

Answer 6

Retail trading (except single-brand product retailing)

Question 7

Which type of business is not permitted for FDI in India related to real estate?

Answer 7

Real estate business or construction of farmhouses

Question 8

What are prohibited rights for FDI in India related to real estate?

Answer 8

Transferable Development Rights (TDRs)

Question 9

What type of manufacturing is prohibited for FDI in India?

Answer 9

Manufacturing of tobacco, cigars, cheroots, cigarettes, and other tobacco substitutes.

Question 10

What is one benefit of Foreign Direct Investment (FDI) in terms of capital?

Answer 10

It brings in much-needed capital and investment that stimulates economic development.

Question 11

How does Foreign Direct Investment (FDI) contribute to capital formation?

Answer 11

It helps in capital formation by bringing in fresh capital.

Question 12

What is one advantage of Foreign Direct Investment (FDI) in terms of technology?

Answer 12

It brings the latest technologies and leads to the development of human capital resources.

Question 13

What is one economic benefit of Foreign Direct Investment (FDI)?

Answer 13

It leads to an increase in tax revenue.

Question 14

How can Foreign Direct Investment (FDI) impact infrastructure development?

Answer 14

It can boost infrastructure development and boost productivity.

Question 15

What is one positive outcome of Foreign Direct Investment (FDI) in terms of employment?

Answer 15

It can help generate employment.

Question 16

How does Foreign Direct Investment (FDI) contribute to the Balance of Payments (BoP)?

Answer 16

It helps in improving the Balance of Payments (BoP).

Question 17

What is one advantage of Foreign Direct Investment (FDI) in terms of market competition?

Answer 17

It provides healthy competition in the market as it leads to a better environment.

Question 18

What is one potential drawback of Foreign Direct Investment (FDI) in terms of political sovereignty?

Answer 18

It can threaten political sovereignty.

Question 19

What is one negative consequence of Foreign Direct Investment (FDI) in terms of market competition?

Answer 19

It leads to cut-throat competition in the market.

Question 20

What is one concern regarding technology brought by Foreign Direct Investment (FDI)?

Answer 20

FDI investor may bring outdated technology.

Question 21

How can Foreign Direct Investment (FDI) impact the foreign exchange rate?

Answer 21

It affects the foreign exchange rate of the country.

Question 22

What is one financial concern related to Foreign Direct Investment (FDI)?

Answer 22

The outflow of foreign currency by way of dividends and royalties paid abroad.

Question 23

How can Foreign Direct Investment (FDI) affect land and property prices?

Answer 23

They may lead to an increase in the price of land and properties.

Question 24

What is one challenge for the government regarding Foreign Direct Investment (FDI)?

Answer 24

Lack of control on the part of the government as these companies work as wholly owned subsidiaries of foreign companies.

Question 25

What is the “cow-boy approach” in the context of Foreign Direct Investment (FDI)?

Answer 25

Adoption of cow-boy approach. [Lack of knowledge about a specific economy may prompt a foreign company to collaborate with the domestic company in order to understand the needs of the economy. Post this, they may start functioning independently and may use domestic companies for their interests.]

Question 26

What is one unethical practice associated with Foreign Direct Investment (FDI)?

Answer 26

Indulge in transfer pricing practices.

Question 27

What is a Chit Fund?

Answer 27

Chit Fund is a form of savings which is a collective initiative, i.e., a certain number of people donate money in installments over a set period of time.

Question 28

How is the reward sum determined in a Chit Fund?

Answer 28

Under this, each subscriber is required to contribute a certain amount and is entitled to a reward sum determined by lot, auction, or tender.

Question 29

How are Chit Funds regulated?

Answer 29

The state governments register and regulate chit funds under the Chit Funds Act of 1982.

Question 30

What is the purpose of Chit Funds?

Answer 30

These funds allow people to pool their savings and get a lump sum amount at the end.

Question 31

What is the governing law for Chit Funds?

Answer 31

These funds are governed and managed under the Chit Funds Act of 1982.

Question 32

What is a Nidhi Company?

Answer 32

A Nidhi Company is a type of Non-Banking Financial Company (NBFC).

Question 33

What is the purpose of a Nidhi Company?

Answer 33

These companies are formed with the purpose of borrowing and lending money to their members.

Question 34

What is the role of a Nidhi Company in promoting saving habits?

Answer 34

It inculcates the habit of saving among its members.

Question 35

What principle do Nidhi Companies operate on?

Answer 35

These companies work on the principle of mutual benefit.

Question 36

How are Nidhi Companies regulated?

Answer 36

They are registered under the Companies Act and regulated by the Ministry of Corporate Affairs.

Question 37

What is Transferable Development Rights (TDR)?

Answer 37

TDR is a technique of land development that separates the development potential of a particular parcel of land and allows its use elsewhere within the defined zones of the city.

Question 38

How does Transferable Development Rights work?

Answer 38

It allows the owner to sell the development rights of a particular parcel of land to another.

Question 39

Where is Transferable Development Rights commonly used?

Answer 39

It is generally used for the redevelopment of inner-city zones and for reconstruction or re-development in various cities and states.

Question 40

What is Transfer Pricing?

Answer 40

Transfer Pricing is a practice that allows for the exchange of goods and services within businesses and between subsidiaries that operate under common control or ownership.

Question 41

How does Transfer Pricing affect foreign companies operating in India?

Answer 41

Under Transfer Pricing, a foreign company operating in India may deliberately import technology from its parent company at a higher price, benefiting the parent company and resulting in an outflow of foreign currency.

Question 42

What are the implications of Transfer Pricing?

Answer 42

Transfer Pricing can show a high cost of production, low profit, and low or no taxes for the company involved.

Question 43

What are the factors that attract Foreign Direct Investment (FDI) in India?

Answer 43

Cheap and skilled labor, huge market, and streamlined legal procedures.

Question 44

What are the factors that detract Foreign Direct Investment (FDI) in India?

Answer 44

Rigid labor market, poor infrastructure, various bureaucratic hurdles, and delay in project approvals.

Question 45

What does India expect from foreign investors?

Answer 45

India expects technology, capital, high exports, and employment generation.