UPSC Prelims Practice Questions — Gross FDI hit 15-year high of $30.7 billion in April-June 2026
Q1. Which of the following are correctly identified as constituents of the financial account of India's Balance of Payments as compiled by the Reserve Bank of India?
1. Direct investment
2. Portfolio investment
3. Other investment, covering currency and deposits, loans and trade credits
4. Secondary income, covering private transfers such as workers' remittances
Which of the above is/are correctly identified?
- Direct investment
- Portfolio investment
- Other investment, covering currency and deposits, loans and trade credits
- Secondary income, covering private transfers such as workers' remittances
- A. 1, 2 and 4
- B. 2, 3 and 4
- C. 1, 2 and 3
- D. 1, 3 and 4
Q2. Consider the following statements regarding India's extant FDI policy framework:
1. FDI is prohibited in the lottery business, in gambling and betting including casinos, and in chit funds.
2. FDI up to 100 per cent is permitted under the automatic route for the manufacture of components and sub-systems for satellites, ground segment and user segment.
3. Every proposal for foreign direct investment, irrespective of the sector, necessarily requires prior approval of the Government before the investment is made.
4. Foreign investment in insurance companies is permitted up to 100 per cent following the amendment of the insurance laws in 2025.
Which of the statements given above is/are correct?
- FDI is prohibited in the lottery business, in gambling and betting including casinos, and in chit funds.
- FDI up to 100 per cent is permitted under the automatic route for the manufacture of components and sub-systems for satellites, ground segment and user segment.
- Every proposal for foreign direct investment, irrespective of the sector, necessarily requires prior approval of the Government before the investment is made.
- Foreign investment in insurance companies is permitted up to 100 per cent following the amendment of the insurance laws in 2025.
- A. 1 and 3 only
- B. 1, 2 and 4
- C. 2, 3 and 4
- D. 1, 2 and 3
Q3. Consider the following as milestones in the liberalisation of India's foreign direct investment regime:
1. The Foreign Investment Promotion Board was abolished pursuant to a Union Cabinet decision of 2017, its approval functions passing to the administrative Ministries and Departments.
2. The regulations governing FDI were notified under the foreign exchange law through Notification No. FEMA 20/2000-RB of May 2000.
3. FDI policy for the space sector was amended to permit up to 49 per cent under the automatic route for launch vehicles and for the creation of spaceports.
4. The FDI limit for the insurance sector was raised from 74 per cent to 100 per cent by amending the Companies Act, 2013.
Which of the above is/are correctly identified?
- The Foreign Investment Promotion Board was abolished pursuant to a Union Cabinet decision of 2017, its approval functions passing to the administrative Ministries and Departments.
- The regulations governing FDI were notified under the foreign exchange law through Notification No. FEMA 20/2000-RB of May 2000.
- FDI policy for the space sector was amended to permit up to 49 per cent under the automatic route for launch vehicles and for the creation of spaceports.
- The FDI limit for the insurance sector was raised from 74 per cent to 100 per cent by amending the Companies Act, 2013.
- A. 1 and 2 only
- B. 1, 2 and 3
- C. 2, 3 and 4
- D. 1 and 4 only
Q4. Consider the following statements regarding net foreign direct investment into India:
1. Net FDI is arrived at by deducting repatriation and disinvestment, and outward direct investment by Indian entities, from gross FDI inflows.
2. In June 2026 inflows exceeded outflows by about $1.3 billion, the highest net level since June 2022.
3. Net FDI in 2025-26 rose to about $7.7 billion from about $1.0 billion a year earlier, an improvement attributed mainly to a decline in repatriation.
4. Net FDI was negative in each of the six months immediately preceding June 2026, though negative in only one of the preceding twelve months.
Which of the above is/are NOT correct?
- Net FDI is arrived at by deducting repatriation and disinvestment, and outward direct investment by Indian entities, from gross FDI inflows.
- In June 2026 inflows exceeded outflows by about $1.3 billion, the highest net level since June 2022.
- Net FDI in 2025-26 rose to about $7.7 billion from about $1.0 billion a year earlier, an improvement attributed mainly to a decline in repatriation.
- Net FDI was negative in each of the six months immediately preceding June 2026, though negative in only one of the preceding twelve months.
- A. 1 and 3 only
- B. 2 only
- C. 1 and 2 only
- D. 4 only
Q5. In India, the primary criterion for classifying a foreign investment in a listed Indian company as direct investment rather than portfolio investment is which one of the following?
- A. Acquisition of 26 per cent or more of the paid-up equity capital, being the threshold that triggers an open offer
- B. Routing of the investment through an entity registered with the securities regulator as a foreign portfolio investor
- C. Undertaking of a minimum lock-in of three years, irrespective of the size of the shareholding acquired
- D. Acquisition of 10 per cent or more of the equity capital through eligible instruments in that company
Q6. Consider the following statements about India's foreign direct investment in 2025-26 as reported in the Reserve Bank of India's Bulletin:
1. Gross FDI inflows rose to about $94.5 billion from about $80.6 billion in the preceding year.
2. Net FDI inflows rose to about $7.7 billion from about $1.0 billion in the preceding year.
3. The improvement in net FDI occurred even though outward direct investment by Indian entities increased.
4. During April–September 2025-26 gross FDI grew by 19.4 per cent to about $51.8 billion, while net FDI over the same period declined.
Which of the above is/are NOT correct?
- Gross FDI inflows rose to about $94.5 billion from about $80.6 billion in the preceding year.
- Net FDI inflows rose to about $7.7 billion from about $1.0 billion in the preceding year.
- The improvement in net FDI occurred even though outward direct investment by Indian entities increased.
- During April–September 2025-26 gross FDI grew by 19.4 per cent to about $51.8 billion, while net FDI over the same period declined.
- A. 1 and 3 only
- B. 4 only
- C. 2 and 4 only
- D. 1, 2 and 3