Consider the following : 1. Foreign currency convertible bonds 2. Foreign institutional investment with certain conditions 3. Global depository receipts 4. Non-resident external deposits Which of the above can be included in Foreign Direct Investments?
A
1, 2 and 3
Correct Answer
B
3 only
C
2 and 4
D
1 and 4
Explanation
Option (A) is correct because FCCBs and GDRs are equity-linked instruments treated as FDI, and FII is classified as FDI if the investment exceeds 10% of the post-issue paid-up equity capital of a company. NRE deposits are excluded because they are categorized as banking capital or debt liabilities in the Balance of Payments, rather than direct investment in the productive capacity of a firm. The core concept tested is the classification of foreign capital inflows based on the Mayaram Committee recommendations and RBI guidelines.
International EconomicsForeign Investment (FDI vs FPI)Foreign Direct Investment (FDI)Foreign Institutional Investment (FII)Foreign Portfolio Investment (FPI)Foreign currency convertible bonds (FCCBs)Global depository receipts (GDRs)Non-resident external deposits (NRE)