FDI in the Tourism Sector

Description: This quiz is designed to assess your knowledge about Foreign Direct Investment (FDI) in the Tourism Sector.
Number of Questions: 14
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Tags: fdi tourism economics
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What is the primary objective of the Indian government's policy on FDI in the tourism sector?

  1. To attract foreign investment and promote economic growth.

  2. To preserve cultural heritage and protect the environment.

  3. To create employment opportunities and develop infrastructure.

  4. To promote tourism as a sustainable industry.


Correct Option: A
Explanation:

The Indian government's policy on FDI in the tourism sector aims to attract foreign investment and promote economic growth by encouraging foreign companies to invest in the development of tourism infrastructure, services, and products.

Which sector within the tourism industry is eligible for 100% FDI under the automatic route?

  1. Hotels and resorts.

  2. Travel agencies and tour operators.

  3. Adventure tourism and wildlife safaris.

  4. Heritage tourism and cultural events.


Correct Option: A
Explanation:

As per the Indian government's FDI policy, hotels and resorts are eligible for 100% FDI under the automatic route, which means that foreign investors can invest in these sectors without prior approval from the government.

What is the minimum investment required for a foreign company to be eligible for FDI in the tourism sector?

  1. $5 million.

  2. $10 million.

  3. $15 million.

  4. $20 million.


Correct Option: B
Explanation:

The minimum investment required for a foreign company to be eligible for FDI in the tourism sector is $10 million. This investment can be made in a single project or in multiple projects.

Which government agency is responsible for regulating FDI in the tourism sector?

  1. Ministry of Tourism.

  2. Department of Industrial Policy and Promotion (DIPP).

  3. Foreign Investment Promotion Board (FIPB).

  4. Reserve Bank of India (RBI).


Correct Option: B
Explanation:

The Department of Industrial Policy and Promotion (DIPP) is the nodal agency responsible for regulating FDI in the tourism sector. It processes FDI applications, grants approvals, and monitors compliance with FDI regulations.

What are the major benefits of FDI in the tourism sector?

  1. Increased employment opportunities.

  2. Improved infrastructure and services.

  3. Technology transfer and skill development.

  4. Promotion of cultural heritage and diversity.


Correct Option:
Explanation:

FDI in the tourism sector brings multiple benefits, including increased employment opportunities, improved infrastructure and services, technology transfer and skill development, and promotion of cultural heritage and diversity.

What are the potential challenges associated with FDI in the tourism sector?

  1. Environmental degradation.

  2. Loss of cultural identity.

  3. Economic exploitation.

  4. Increased competition for local businesses.


Correct Option:
Explanation:

FDI in the tourism sector can pose potential challenges, such as environmental degradation, loss of cultural identity, economic exploitation, and increased competition for local businesses.

How does the Indian government ensure sustainable development of the tourism sector while promoting FDI?

  1. By imposing strict environmental regulations.

  2. By promoting responsible tourism practices.

  3. By encouraging investment in eco-friendly tourism projects.

  4. By involving local communities in tourism development.


Correct Option:
Explanation:

The Indian government employs a comprehensive approach to ensure sustainable development of the tourism sector while promoting FDI. This includes imposing strict environmental regulations, promoting responsible tourism practices, encouraging investment in eco-friendly tourism projects, and involving local communities in tourism development.

Which state in India has attracted the highest FDI in the tourism sector?

  1. Maharashtra.

  2. Rajasthan.

  3. Goa.

  4. Uttar Pradesh.


Correct Option: A
Explanation:

Maharashtra has consistently attracted the highest FDI in the tourism sector due to its diverse tourist destinations, well-developed infrastructure, and favorable government policies.

What is the contribution of the tourism sector to India's GDP?

  1. 5-7%.

  2. 7-9%.

  3. 9-11%.

  4. 11-13%.


Correct Option: B
Explanation:

The tourism sector contributes approximately 7-9% to India's GDP, making it a significant contributor to the country's economy.

Which international organization provides guidelines and recommendations for sustainable tourism development?

  1. World Tourism Organization (UNWTO).

  2. United Nations Environment Programme (UNEP).

  3. World Bank.

  4. International Monetary Fund (IMF).


Correct Option: A
Explanation:

The World Tourism Organization (UNWTO) is the leading international organization that provides guidelines and recommendations for sustainable tourism development.

What is the concept of 'responsible tourism'?

  1. Minimizing negative impacts on the environment and local communities.

  2. Promoting cultural understanding and respect.

  3. Supporting local economies and businesses.

  4. All of the above.


Correct Option: D
Explanation:

Responsible tourism encompasses minimizing negative impacts on the environment and local communities, promoting cultural understanding and respect, and supporting local economies and businesses.

How can FDI contribute to the preservation of cultural heritage in the tourism sector?

  1. By providing financial resources for the restoration and maintenance of cultural sites.

  2. By promoting cultural tourism and raising awareness about local traditions.

  3. By supporting the development of cultural infrastructure and facilities.

  4. All of the above.


Correct Option: D
Explanation:

FDI can contribute to the preservation of cultural heritage in the tourism sector by providing financial resources for the restoration and maintenance of cultural sites, promoting cultural tourism and raising awareness about local traditions, and supporting the development of cultural infrastructure and facilities.

What are the key elements of a successful FDI policy in the tourism sector?

  1. Clear and transparent regulations.

  2. Stable political and economic environment.

  3. Adequate infrastructure and skilled workforce.

  4. All of the above.


Correct Option: D
Explanation:

A successful FDI policy in the tourism sector requires clear and transparent regulations, a stable political and economic environment, adequate infrastructure and skilled workforce.

How can FDI promote technology transfer and skill development in the tourism sector?

  1. By introducing advanced technologies and management practices.

  2. By providing training and skill development opportunities for local employees.

  3. By encouraging collaboration between foreign and domestic companies.

  4. All of the above.


Correct Option: D
Explanation:

FDI can promote technology transfer and skill development in the tourism sector by introducing advanced technologies and management practices, providing training and skill development opportunities for local employees, and encouraging collaboration between foreign and domestic companies.

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