Topic Details (Notes format)

FDI, FPI, and Capital Inflows

Subject: Economics

Book: Comprehensive Indian Economy

Foreign Direct Investment (FDI) involves ownership/control of domestic enterprises by foreign investors, fostering technology transfers and job creation. Foreign Portfolio Investment (FPI) pertains to passive holdings in stocks/bonds. Both shape India’s capital account and currency stability. Policy liberalization across sectors (retail, defense, insurance) aims to attract FDI, yet concerns over portfolio outflows remain. Monitoring “hot money” flows is essential to avoid volatility. For exam readiness, clarify FDI vs. FPI differences, sectors with automatic vs. government routes, and how capital inflows can buffer or destabilize the balance of payments depending on global sentiments.

Practice Questions

Which of the following is NOT a component of Aggregate Demand?

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Which of the following is an example of a non-renewable resource?

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Which of the following is NOT a function of the World Trade Organization (WTO)?

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Which is the largest source of tax revenue for the Government of India?

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Which of the following is a characteristic of “perfect competition”?

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Which organization is responsible for estimating India’s Gross Domestic Product (GDP)?

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Which term refers to the decrease in the value of a currency relative to foreign currencies?

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What is a “repo rate”?

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What is “fiscal stimulus”?

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What does the term “elasticity of demand” measure?

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