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

Answer: (d) 1, 2 and 3 only

Under India's FDI policy, FDI is investment by a person resident outside India in the capital of an Indian company. Unlike portfolio investment, its aim is to obtain a lasting interest and influence over how the company is managed. Subsidiaries of foreign companies, majority foreign equity holdings and companies wholly financed by foreign companies all fit this. Portfolio investment is a separate category, in which investors generally do not expect to influence management. So statements 1, 2 and 3 are correct, and the answer is (d).

• ✓ 1. A subsidiary of a foreign company in India is set up with foreign equity capital and is controlled by the foreign parent. That is a non-resident investing directly in the capital of an Indian company.
• ✓ 2. A majority foreign equity holding is non-resident investment in an Indian company's capital that carries control, so it is FDI. The policy treats an entity as 'owned' by non-residents when more than 50% of its capital is beneficially owned by non-residents.
• ✓ 3. A company financed entirely by foreign companies, such as a wholly owned subsidiary, is built on capital brought in by non-residents who hold full control. It falls within FDI.
• ✗ 4. The FDI policy separates direct investment from portfolio investment. Portfolio investors do not generally expect to influence the management of the enterprise, so portfolio investment is not FDI.

Remember · FDI means non-resident investment in an Indian company's capital that brings lasting interest and influence over management. Portfolio investment (for example, FII buying of shares and bonds) is a separate category of foreign investment.

Question: UPSC Civil Services (Preliminary) 2012, General Studies paper. Explanation: Minimalist IAS, checked 25 Oct 2026 (how we verify). · Report an error