UPSC Prelims Practice Questions — India’s share of global greenfield investments more than double China’s during 2020-25

Q1. With reference to the forms that foreign direct investment (FDI) can take, consider the following statements: Which of the statements given above is/are correct?

  1. A foreign company buying a controlling stake in an Indian cement plant that is already operating is counted as FDI, but not as greenfield investment.
  2. A foreign company building a new factory in India through a subsidiary that it has just incorporated in India is a greenfield investment.
  3. An acquisition can be recorded as FDI only if the foreign buyer later adds new capacity to the acquired firm.
  • A. 1 and 3 only
  • B. 1, 2 and 3
  • C. 2 only
  • D. 1 and 2 only

Q2. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. For a developing host economy, greenfield FDI is generally regarded as adding more to productive capacity than an acquisition of the same value.
  2. Greenfield investment creates new assets in the host country, whereas an acquisition transfers ownership of a firm that already exists.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct

Q3. With reference to how the international benchmark separates foreign direct investment from foreign portfolio investment, consider the following statements: Which of the statements given above is/are correct?

  1. An investment is treated as direct only when the foreign investor acquires a majority, that is more than half, of the voting power of the enterprise.
  2. A foreign fund that holds 4% of a listed Indian company's voting shares for many years is still treated as a portfolio investor.
  3. A foreign investor that holds 15% of the voting power of an Indian company is classified as a portfolio investor if it has not appointed any director to the board.
  • A. 2 and 3 only
  • B. 1 only
  • C. 2 only
  • D. 1, 2 and 3

Q4. An international report finds that over 2020-25, India accounted for 5.7% and China for 2.8% of the value of global greenfield investment, where greenfield investment means companies investing in new ventures in another country. Which of the following inferences can validly be drawn from this information alone?

  1. Over 2020-25, the value of greenfield investment that went into India was greater than the value that went into China.
  2. India's total FDI inflows over 2020-25 were larger than China's total FDI inflows.
  3. Over 2020-25, foreign investors acquired more existing companies in India than in China.
  • A. 1, 2 and 3
  • B. 1 only
  • C. 2 and 3 only
  • D. 1 and 2 only

Q5. Consider the following statements: Which of the following is correct in respect of the above statements?

  1. Developing economies generally prefer foreign direct investment to foreign portfolio investment as a source of external capital.
  2. Foreign portfolio investment is generally less volatile than foreign direct investment because portfolio holdings are spread over a large number of investors.
  • A. Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
  • B. Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I
  • C. Statement-I is correct, but Statement-II is incorrect
  • D. Statement-I is incorrect, but Statement-II is correct

Q6. Over 2020-25, the shares of global greenfield investment were: India 5.7%, Malaysia 4%, Indonesia 3.8% and China 2.8%. Over the same period, strategic sectors rose from 16% of global greenfield investment in 2020 to 44% in 2025, and this strategic-sector investment was concentrated in Europe and North America. Which of the following inferences can validly be drawn from the above?

  1. India's lead in overall greenfield share does not, by itself, show that India is a leading destination for strategic-sector greenfield investment.
  2. The value of greenfield investment going into China fell in every year from 2020 to 2025.
  3. The share of non-strategic sectors in global greenfield investment was smaller in 2025 than in 2020.
  4. The absolute value of global greenfield investment in non-strategic sectors must have fallen between 2020 and 2025.
  • A. 1 and 3 only
  • B. 2 and 4 only
  • C. 1, 2 and 3 only
  • D. 1, 3 and 4 only

Q7. Consider the following assertion: India's larger share of global greenfield investment compared with China's over 2020-25 is consistent with multinational firms diversifying their supply chains away from China. Which of the following statements support/supports the above assertion?

  1. Greenfield investment in strategic sectors, led by AI infrastructure, is concentrated in Europe and North America.
  2. Firms are increasingly moving production processes to trusted countries to make their supply chains less vulnerable to geopolitical tensions.
  3. Other Asian alternatives, Malaysia and Indonesia, also drew larger shares of global greenfield investment than China over the same period.
  • A. 1 and 2 only
  • B. 1, 2 and 3
  • C. 1 only
  • D. 2 and 3 only

Q8. With reference to the design of India's Production Linked Incentive (PLI) schemes, consider the following statements: Which of the statements given above is/are correct?

  1. An eligible company that imports finished goods and resells them in India can claim incentives on the higher sales.
  2. Incentives are calculated on sales above those of a defined base year, rather than on the cost of the inputs or capital that the firm uses.
  3. A firm that builds new capacity but does not raise its sales of goods manufactured in India above the base year earns no incentive for that period.
  • A. 3 only
  • B. 2 and 3 only
  • C. 1, 2 and 3
  • D. 1 and 2 only