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UPSC Notes

Foreign Direct Investment (FDI)

PYQs

12

Articles

3

Momentum

32

Phase IFoundation

Background

Overview

FDI is vital for India's economic development, industrialization, and integration into the global economy. UPSC frequently asks about its role in economic growth, employment, technology transfer, and its impact on various sectors.

Foreign Direct Investment (FDI) refers to an investment made by a firm or individual in one country into business interests located in another country. It is a crucial component of a nation's capital account and a key driver of economic growth, bringing capital, technology, and management expertise.

Phase IIStatic core

Facts & tables

Key facts

Types of FDI

Greenfield (new facilities) vs. Brownfield (acquiring existing assets).

Benefits

Capital inflow, technology transfer, employment generation, skill development, market access.

Government Policy

India has liberalized FDI policies in most sectors, with automatic and government approval routes.

Impact on Balance of Payments

FDI is a non-debt creating capital inflow, improving the current account deficit in the long run.

UAE's Rank as Source

UAE is the seventh-largest source of FDI for India.

Current & Planned Investment

UAE has invested $25 billion and intends to invest another $25 billion in the near future.

Long-term Goal

UAE's longer-term objective is to take its investments in India to $100 billion.

Targeted Sectors

Ports, shipbuilding, energy, space, financial services, startups, stock markets.

Reference table

Static syllabus anchors

TypeReference
Conceptual areaIndian Economy
Conceptual areaExternal Sector & Capital Flows

Reference table

Institutions & roles

BodyRole
Department for Promotion of Industry and Internal Trade (DPIIT)Formulates policy
Reserve Bank of IndiaRegulates
Reserve Bank of India (RBI)Regulates inflows
Phase IIIExam lens

Prelims angle

Overview

Prelims angle: Multi-statement analysis

Prelims angle: Conceptual understanding

Quick revision

  • Non-debt creating capital inflow.
  • Boosts capital formation, technology, skills.
  • Greenfield vs. Brownfield investments.
  • Key driver for 'Make in India'.
  • Governed by DPIIT and RBI regulations.

High-confidence PYQs

2024Multi-statement analysis, Factual recall

Consider the following statements: 1. In India, Non-Banking Financial Companies can access the Liquidity Adjustment Facility window of the Reserve Bank of I...

EconomyOpen question
2022Multi-statement analysis, Policy measures

With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy gover...

EconomyOpen question

With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct ? 1. They can sell their own goods in ...

EconomyOpen question
2022Multi-statement analysis, Conceptual understanding

With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy gover...

EconomyOpen question

With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct ? 1. They can sell their own goods in ...

EconomyOpen question
2021Multi-statement analysis, Conceptual understanding

Consider the following 1. Foreign Currency convertible bonds 2. Foriegn Institutional investment with certain conditions 3. Global depository receipts 4. Non...

EconomyOpen question
2020Multi-statement analysis, Conceptual understanding

With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?

EconomyOpen question

With reference to the Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct? 1. Quantitative restrictions on imports b...

EconomyOpen question

If another global financial crisis happens in the near future, which of the following actions/policies are most likely to give some immunity to India? 1. No...

EconomyOpen question
2020Conceptual understanding, Definition-based questions

With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?

EconomyOpen question

With reference to the Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct? 1. Quantitative restrictions on imports b...

EconomyOpen question

If another global financial crisis happens in the near future, which of the following actions/policies are most likely to give some immunity to India? 1. No...

EconomyOpen question
2020Conceptual understanding, Multi-statement analysis

With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?

EconomyOpen question

With reference to the Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct? 1. Quantitative restrictions on imports b...

EconomyOpen question

If another global financial crisis happens in the near future, which of the following actions/policies are most likely to give some immunity to India? 1. No...

EconomyOpen question
2019Conceptual understanding, Policy measures

Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?

EconomyOpen question

Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without regis...

EconomyOpen question
2019Factual recall, Definition-based questions

Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?

EconomyOpen question

Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without regis...

EconomyOpen question
2017Multi-statement analysis, Conceptual understanding

Which of the following has/have occurred in India after its liberalization of economic policies in 1991? 1. The share of agriculture in GDP increased enormo...

EconomyOpen question
2016Policy measures, Multi-statement analysis

What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and 'Gold Monetization Scheme'? 1. To bring the idle gold lying with India hous...

EconomyOpen question
2013Multi-statement analysis, Conceptual understanding

Which of the following constitute Capital Account? 1. Foreign Loans 2. Foreign Direct Investment 3. Private Remittances 4. Portfolio Investment Select the c...

EconomyOpen question

Topic timeline

Indian EconomyExternal Sector & Capital Flows
Prelims 2013· Multi-statement analysis, Conceptual understanding

Which of the following constitute Capital Account? 1. Foreign Loans 2. Foreign Direct Investment 3. Private Remittances 4. Portfolio Investment Select the c...

Open question
Prelims 2016· Policy measures, Multi-statement analysis

What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and 'Gold Monetization Scheme'? 1. To bring the idle gold lying with India hous...

Open question
Prelims 2017· Multi-statement analysis, Conceptual understanding

Which of the following has/have occurred in India after its liberalization of economic policies in 1991? 1. The share of agriculture in GDP increased enormo...

Open question
Prelims 2019· Conceptual understanding, Policy measures

Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?

Open question

Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without regis...

Open question
Prelims 2019· Factual recall, Definition-based questions

Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?

Open question

Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without regis...

Open question
Prelims 2020· Multi-statement analysis, Conceptual understanding

With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?

Open question

With reference to the Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct? 1. Quantitative restrictions on imports b...

Open question

If another global financial crisis happens in the near future, which of the following actions/policies are most likely to give some immunity to India? 1. No...

Open question
Prelims 2020· Conceptual understanding, Definition-based questions

With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?

Open question

With reference to the Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct? 1. Quantitative restrictions on imports b...

Open question

If another global financial crisis happens in the near future, which of the following actions/policies are most likely to give some immunity to India? 1. No...

Open question
Prelims 2020· Conceptual understanding, Multi-statement analysis

With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?

Open question

With reference to the Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct? 1. Quantitative restrictions on imports b...

Open question

If another global financial crisis happens in the near future, which of the following actions/policies are most likely to give some immunity to India? 1. No...

Open question
Prelims 2021· Multi-statement analysis, Conceptual understanding

Consider the following 1. Foreign Currency convertible bonds 2. Foriegn Institutional investment with certain conditions 3. Global depository receipts 4. Non...

Open question
Prelims 2022· Multi-statement analysis, Policy measures

With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy gover...

Open question

With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct ? 1. They can sell their own goods in ...

Open question
Prelims 2022· Multi-statement analysis, Conceptual understanding

With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy gover...

Open question

With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct ? 1. They can sell their own goods in ...

Open question
Prelims 2024· Multi-statement analysis, Factual recall

Consider the following statements: 1. In India, Non-Banking Financial Companies can access the Liquidity Adjustment Facility window of the Reserve Bank of I...

Open question

Odisha signs memorandum of cooperation for Japan-backed projects worth ₹67,000 crore

04 Jul 2026 · FDI is a cross-border investment in productive assets, bringing capital, technology, and jobs. India actively seeks FDI to boost economic growth and achieve development goals.

Read article

India approves just 1 Chinese FDI proposal worth ₹1 crore in FY26; 13 from Hong Kong

03 Aug 2026 · FDI is a key component of India's external sector, attracting foreign capital for economic growth through automatic and government routes, with policy oversight by DPIIT.

Read article

UAE signals another $25 billion investment in India; eyes ports, energy and space sectors: Goyal

29 Sep 2026 · FDI in India is a critical capital source, driving economic growth and development. The UAE is a significant contributor, with substantial existing and planned investments across key sectors like infrastructure, energy, and technology, reflecting investor confidence in India's economy.

Read article

Related topics

Current topic

Foreign Direct Investment (FDI)

Often confused with

External Sector & Capital Flows

Open notesOften confused with

Bilateral Investment Treaties (BITs)

Open notes
Often confused with

Make in India Initiative

Coming soon
Often confused with

Foreign Portfolio Investment (FPI)

Coming soon
Often confused with

India-UAE Bilateral Economic Relations

Coming soon
Often confused with

Comprehensive Economic and Trade Agreements (CETAs) / Free Trade Agreements (FTAs)

Open notes

Practice writing on this topic

UPSC has asked 12 linked questions on Foreign Direct Investment (FDI) in Mains. Write an answer to one — and get it evaluated.

See Mains PYQsEvaluate an answer

UPSC Prelims PYQs on Foreign Direct Investment (FDI)

Practice official previous year questions asked by UPSC related to this concept.

With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy gover...

2022·Economy
Solve

Consider the following 1. Foreign Currency convertible bonds 2. Foriegn Institutional investment with certain conditions 3. Global depository receipts 4. Non...

2021·Economy
Solve

What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and 'Gold Monetization Scheme'? 1. To bring the idle gold lying with India hous...

2016·Economy
Solve

Which of the following has/have occurred in India after its liberalization of economic policies in 1991? 1. The share of agriculture in GDP increased enormo...

2017·Economy
Solve

Which of the following constitute Capital Account? 1. Foreign Loans 2. Foreign Direct Investment 3. Private Remittances 4. Portfolio Investment Select the c...

2013·Economy
Solve

With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?

2020·Economy
Solve

Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee?

2019·Economy
Solve

Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without regis...

2019·Economy
Solve

With reference to the Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct? 1. Quantitative restrictions on imports b...

2020·Economy
Solve

With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct ? 1. They can sell their own goods in ...

2022·Economy
Solve

If another global financial crisis happens in the near future, which of the following actions/policies are most likely to give some immunity to India? 1. No...

2020·Economy
Solve

Consider the following statements: 1. In India, Non-Banking Financial Companies can access the Liquidity Adjustment Facility window of the Reserve Bank of I...

2024·Economy
Solve

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