Which of the following would include Foreign Direct Investment in India?

1. Subsidiaries of companies in India
2. Majority foreign equity holding in Indian companies
3. Companies exclusively financed by foreign companies
4. Portfolio investment

Select the correct answer using the code given below:

1. 1, 2, 3 and 4
2. 2 and 4 only
3. 1 and 3 only
4. 1, 2 and 3 only

Explanation

Option (d) is correct

• Subsidiaries of companies in India: If a foreign company establishes a subsidiary in India, it qualifies as FDI because it involves direct investment in the Indian economy. This is included in FDI.
• Majority foreign equity holding in Indian companies: When foreign investors own a majority stake (more than 50%) in Indian companies, it constitutes FDI, as they gain significant control over the operations. This is included in FDI.
• Companies exclusively financed by foreign companies: Companies in India fully financed by foreign companies are a clear example of FDI, as they represent direct investment in Indian businesses. This is included in FDI.
• Portfolio investment: Portfolio investment refers to foreign investments in financial instruments like stocks, bonds, and other securities without gaining control or a significant influence over the entity.
• It is considered Foreign Portfolio Investment (FPI), not FDI.

Answer: (d) 1, 2 and 3 only; Difficulty Level: Easy