Objectives of FDI

Description: This quiz aims to assess your understanding of the objectives of Foreign Direct Investment (FDI) in the context of Indian Economics.
Number of Questions: 15
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Tags: fdi objectives of fdi indian economy
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What is the primary objective of FDI in India?

  1. To promote economic growth and development

  2. To increase employment opportunities

  3. To improve the balance of payments

  4. To enhance technological capabilities


Correct Option: A
Explanation:

The primary objective of FDI in India is to promote economic growth and development by attracting foreign capital, technology, and expertise.

How does FDI contribute to economic growth in India?

  1. By increasing investment and capital formation

  2. By creating new employment opportunities

  3. By promoting technological advancement

  4. By improving the balance of payments


Correct Option: A
Explanation:

FDI contributes to economic growth by increasing investment and capital formation, which leads to an expansion of productive capacity and output.

In which sector does FDI have the most significant impact on employment generation in India?

  1. Manufacturing

  2. Services

  3. Agriculture

  4. Construction


Correct Option: B
Explanation:

FDI has the most significant impact on employment generation in the services sector in India, particularly in industries such as information technology, telecommunications, and financial services.

Which of the following is NOT a benefit of FDI for India?

  1. Increased exports

  2. Improved foreign exchange reserves

  3. Reduced dependence on imports

  4. Increased government revenue


Correct Option: C
Explanation:

FDI does not necessarily lead to reduced dependence on imports, as it can also involve the import of intermediate goods and raw materials.

How does FDI help India improve its technological capabilities?

  1. By transferring advanced technologies and know-how

  2. By promoting research and development activities

  3. By facilitating the adoption of best practices

  4. All of the above


Correct Option: D
Explanation:

FDI contributes to the improvement of India's technological capabilities through the transfer of advanced technologies and know-how, the promotion of research and development activities, and the facilitation of the adoption of best practices.

Which of the following is NOT a challenge associated with FDI in India?

  1. Potential displacement of domestic industries

  2. Environmental concerns

  3. Exploitation of labor

  4. Increased economic growth


Correct Option: D
Explanation:

Increased economic growth is not a challenge associated with FDI, but rather a benefit.

What is the role of the government in regulating FDI in India?

  1. To ensure that FDI is in line with national economic policies

  2. To protect domestic industries from unfair competition

  3. To promote FDI in priority sectors

  4. All of the above


Correct Option: D
Explanation:

The government plays a crucial role in regulating FDI in India by ensuring that it is in line with national economic policies, protecting domestic industries from unfair competition, and promoting FDI in priority sectors.

Which government agency is responsible for approving FDI proposals in India?

  1. Reserve Bank of India (RBI)

  2. Foreign Investment Promotion Board (FIPB)

  3. Ministry of Commerce and Industry

  4. Department of Industrial Policy and Promotion (DIPP)


Correct Option: D
Explanation:

The Department of Industrial Policy and Promotion (DIPP) is the government agency responsible for approving FDI proposals in India.

What is the minimum investment required for a foreign company to be eligible for automatic approval of FDI in India?

  1. $1 million

  2. $5 million

  3. $10 million

  4. $15 million


Correct Option: C
Explanation:

The minimum investment required for a foreign company to be eligible for automatic approval of FDI in India is $10 million.

Which sector in India has the highest FDI limit?

  1. Manufacturing

  2. Services

  3. Agriculture

  4. Defense


Correct Option: D
Explanation:

The defense sector in India has the highest FDI limit, with a cap of 49% for foreign investment.

What is the impact of FDI on the Indian Rupee?

  1. It strengthens the Rupee

  2. It weakens the Rupee

  3. It has no impact on the Rupee

  4. It depends on the economic conditions


Correct Option: D
Explanation:

The impact of FDI on the Indian Rupee depends on various economic conditions, such as the overall balance of payments, the demand for foreign exchange, and the level of foreign exchange reserves.

How does FDI contribute to the development of infrastructure in India?

  1. By providing financial resources for infrastructure projects

  2. By bringing in advanced technologies and expertise

  3. By promoting public-private partnerships

  4. All of the above


Correct Option: D
Explanation:

FDI contributes to the development of infrastructure in India by providing financial resources for infrastructure projects, bringing in advanced technologies and expertise, and promoting public-private partnerships.

Which of the following is NOT a factor that influences the flow of FDI into India?

  1. Political stability

  2. Economic growth prospects

  3. Foreign exchange reserves

  4. Government policies


Correct Option: C
Explanation:

Foreign exchange reserves are not a direct factor that influences the flow of FDI into India.

What is the role of FDI in promoting sustainable development in India?

  1. By encouraging the adoption of environmentally friendly technologies

  2. By promoting social responsibility among businesses

  3. By supporting community development initiatives

  4. All of the above


Correct Option: D
Explanation:

FDI can contribute to sustainable development in India by encouraging the adoption of environmentally friendly technologies, promoting social responsibility among businesses, and supporting community development initiatives.

How does FDI help India integrate into the global economy?

  1. By increasing exports and imports

  2. By promoting foreign trade and investment

  3. By facilitating technology transfer

  4. All of the above


Correct Option: D
Explanation:

FDI helps India integrate into the global economy by increasing exports and imports, promoting foreign trade and investment, and facilitating technology transfer.

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