UPSC Prelims Practice Questions — Net FDI hits 45-month high in Feb., breaks six-month ‘jinx’

Q1. The formulation and administration of India's Foreign Direct Investment (FDI) policy — including entry routes and sectoral caps — is primarily the responsibility of which one of the following?

  • A. Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce & Industry
  • B. Reserve Bank of India, Department of External Investments and Operations
  • C. Securities and Exchange Board of India (SEBI)
  • D. Department of Economic Affairs, Ministry of Finance

Q2. With reference to how India's external investment flows are measured and classified, consider the following statements: 1. Foreign Direct Investment typically involves acquiring at least a 10% equity stake conferring a lasting or controlling interest, whereas Foreign Portfolio Investment is generally passive and below that threshold. 2. Both FDI and FPI are recorded under the capital (financial) account of the balance of payments. 3. Net FDI is derived by subtracting repatriation, disinvestment and outward FDI from gross inward FDI. Which of the statements given above are correct?

  1. Foreign Direct Investment typically involves acquiring at least a 10% equity stake conferring a lasting or controlling interest, whereas Foreign Portfolio Investment is generally passive and below that threshold.
  2. Both FDI and FPI are recorded under the capital (financial) account of the balance of payments.
  3. Net FDI is derived by subtracting repatriation, disinvestment and outward FDI from gross inward FDI.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q3. The monthly net FDI data that showed India's net FDI turning positive in February 2026, after several months of net outflows, is compiled and released by which one of the following?

  • A. Reserve Bank of India, as part of its balance of payments statistics
  • B. DPIIT, in its monthly FDI equity inflow factsheet
  • C. National Statistical Office under MoSPI
  • D. Securities and Exchange Board of India

Q4. The February 2026 net FDI figure released by the RBI attracted particular attention primarily because it was:

  • A. The highest monthly net FDI surplus in about 45 months, ending a six-month run of negative net FDI
  • B. The first-ever positive net FDI reading recorded by the RBI
  • C. The lowest monthly net FDI outflow in the fiscal year
  • D. The highest gross FDI inflow ever recorded in a single month

Q5. Regarding the regulatory framework governing FDI entry into India, consider the following statements: 1. Under the automatic route, a non-resident investor does not require prior approval of the RBI or the Central Government. 2. Under the government route, prior Government approval is required before the investment is made. 3. The transfer or issue of securities to a person resident outside India is treated as a current account transaction under FEMA, 1999. Which of the statements given above are correct?

  1. Under the automatic route, a non-resident investor does not require prior approval of the RBI or the Central Government.
  2. Under the government route, prior Government approval is required before the investment is made.
  3. The transfer or issue of securities to a person resident outside India is treated as a current account transaction under FEMA, 1999.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q6. As announced in the Union Budget 2025, the FDI sectoral cap for the insurance sector (for companies investing the entire premium in India) was raised to what percentage?

  • A. 100%
  • B. 74%
  • C. 49%
  • D. 51%

Q7. In which financial year did India record its then highest-ever annual FDI inflow of about $83.57 billion?

  • A. FY2021-22
  • B. FY2020-21
  • C. FY2023-24
  • D. FY2024-25

Q8. According to DPIIT data, which sector was the single largest recipient of FDI equity inflows into India in FY2024-25?

  • A. Services sector
  • B. Computer software and hardware
  • C. Manufacturing
  • D. Trading

Q9. In DPIIT's country-wise FDI statistics, the 'source country' of an FDI inflow (e.g. Singapore or Mauritius) most precisely refers to:

  • A. The country from which the investment is immediately routed into India, which may differ from the ultimate investor's country
  • B. The country of ultimate beneficial ownership of the investing entity
  • C. The country where the goods or services produced by the investment are finally sold
  • D. The country in which the Indian recipient company is headquartered

Q10. The 1991 economic reforms in India are commonly summarised by the acronym 'LPG'. In this context, 'LPG' stands for:

  • A. Liberalisation, Privatisation, Globalisation
  • B. Licensing, Production, Growth
  • C. Liberalisation, Privatisation, Governance
  • D. Localisation, Protection, Growth

Q11. Consider the following statements about the RBI's publications and data releases: 1. The RBI Bulletin is a monthly publication. 2. The RBI Bulletin carries analytical articles and speeches of the Governor and Deputy Governors. 3. India's full balance of payments data are released by the RBI on a monthly basis. 4. The RBI is a subscriber to the IMF's Special Data Dissemination Standards (SDDS). Which of the statements given above is/are NOT correct?

  1. The RBI Bulletin is a monthly publication.
  2. The RBI Bulletin carries analytical articles and speeches of the Governor and Deputy Governors.
  3. India's full balance of payments data are released by the RBI on a monthly basis.
  4. The RBI is a subscriber to the IMF's Special Data Dissemination Standards (SDDS).
  • A. 1 and 3
  • B. 3 only
  • C. 2 and 4
  • D. 3 and 4