UPSC Prelims Practice Questions — Did Press Note 3 relaxations help attract more FDI?
Q1. With reference to the change brought about in India's FDI policy by Press Note 3 (2020 Series), consider the following statements:
1. Before this Press Note, the requirement to invest only through the Government route applied, among India's land neighbours, to citizens of and entities incorporated in Bangladesh and Pakistan.
2. After this Press Note, a citizen of Bangladesh could invest through the automatic route in sectors other than defence, space and atomic energy.
3. The Press Note extended the Government route requirement to an investment where the beneficial owner is situated in a land-bordering country, even if the investing entity itself is incorporated elsewhere.
Which of the statements given above is/are correct?
- Before this Press Note, the requirement to invest only through the Government route applied, among India's land neighbours, to citizens of and entities incorporated in Bangladesh and Pakistan.
- After this Press Note, a citizen of Bangladesh could invest through the automatic route in sectors other than defence, space and atomic energy.
- The Press Note extended the Government route requirement to an investment where the beneficial owner is situated in a land-bordering country, even if the investing entity itself is incorporated elsewhere.
- A. 1 and 2 only
- B. 2 and 3 only
- C. 1 and 3 only
- D. 1, 2 and 3
Q2. Under India's FDI policy, citizens of and entities incorporated in which one of India's land neighbours are barred from investing in defence, space and atomic energy even through the Government route?
- A. Bangladesh, whose citizens and entities may invest only after prior Government approval
- B. Myanmar, whose citizens and entities were brought under the restriction in April 2020
- C. China, at whose investments the 2020 policy amendment was principally directed
- D. Pakistan, whose citizens and entities may otherwise invest through the Government route
Q3. Consider the following statements regarding the circumstances in which Press Note 3 (2020 Series) was issued:
1. The Government's stated objective in issuing it was to curb opportunistic takeovers or acquisitions of Indian companies arising out of the border standoff in eastern Ladakh.
2. It was issued on 17 April 2020, that is, before the Galwan Valley clash of June 2020.
3. It was given legal effect through an amendment to the Foreign Exchange Management (Non-Debt Instruments) Rules notified in April 2020.
Which of the statements given above is/are correct?
- The Government's stated objective in issuing it was to curb opportunistic takeovers or acquisitions of Indian companies arising out of the border standoff in eastern Ladakh.
- It was issued on 17 April 2020, that is, before the Galwan Valley clash of June 2020.
- It was given legal effect through an amendment to the Foreign Exchange Management (Non-Debt Instruments) Rules notified in April 2020.
- A. 1 and 2 only
- B. 2 and 3 only
- C. 1 and 3 only
- D. 1, 2 and 3
Q4. Consider the following:
1. The availability of the automatic route to Chinese entities investing in most sectors of the Indian economy
2. The notification of the Foreign Exchange Management (Non-Debt Instruments) Amendment Rules that enforced the land-border restriction
3. The Galwan Valley clash in eastern Ladakh
4. The commencement of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019
Which of the above is/are correctly identified as belonging to the period before the issue of Press Note 3 (2020 Series)?
- The availability of the automatic route to Chinese entities investing in most sectors of the Indian economy
- The notification of the Foreign Exchange Management (Non-Debt Instruments) Amendment Rules that enforced the land-border restriction
- The Galwan Valley clash in eastern Ladakh
- The commencement of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019
- A. 1 and 4
- B. 2 and 3
- C. 1, 3 and 4
- D. 1, 2, 3 and 4
Q5. The 2026 decision to change the guidelines on investments from countries sharing a land border with India was taken by which one of the following?
- A. The Cabinet Committee on Economic Affairs, which clears all foreign investment proposals
- B. The Foreign Investment Promotion Board, the standing inter-ministerial body for such approvals
- C. The Union Cabinet chaired by the Prime Minister, on the proposal of the Government
- D. The Cabinet Committee on Security, which decides all matters with a national security dimension
Q6. In the 2026 revision of the guidelines on investments from land-bordering countries, the definition and criteria for determining 'beneficial ownership' have been aligned with those already used by the investing community under which one of the following?
- A. The Companies (Significant Beneficial Owners) Rules, 2018, framed under the Companies Act, 2013
- B. The Foreign Exchange Management (Non-debt Instruments) Rules, 2019, framed under FEMA, 1999
- C. The Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019
- D. The Prevention of Money-laundering (Maintenance of Records) Rules, 2005, framed under the PMLA
Q7. The Foreign Exchange Management (Non-debt Instruments) Rules, 2019 — which govern equity investment in Indian entities by persons resident outside India — are notified and amended by which one of the following?
- A. The Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry
- B. The Department of Economic Affairs, Ministry of Finance
- C. The Foreign Exchange Department, Reserve Bank of India
- D. The Department of Revenue, Ministry of Finance
Q8. Under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, an investment by a person resident outside India in a LISTED Indian company is classified as Foreign Direct Investment only when it amounts to which one of the following?
- A. More than 25 per cent of the paid-up equity capital of the company on a fully diluted basis
- B. 26 per cent or more of the paid-up equity capital of the company on a fully diluted basis
- C. Less than 10 per cent of the paid-up equity capital of the company
- D. 10 per cent or more of the paid-up equity capital of the company
Q9. The Government stated in August 2026 that 29 investments worth about ₹4,895.65 crore had been reported under the revised framework for investments from land-bordering countries. Consider the following sectors:
1. Data Centres
2. Pharmaceuticals
3. Artificial Intelligence
4. Multi-brand retail trading
Which of the above is/are correctly identified as sectors in which such investment was reported?
- Data Centres
- Pharmaceuticals
- Artificial Intelligence
- Multi-brand retail trading
- A. 1, 2 and 3
- B. 2 and 4
- C. 1 and 3 only
- D. 1, 2, 3 and 4
Q10. An Indian investee entity that receives investment falling within the relaxed non-controlling threshold for land-bordering countries is required to report the relevant details to which one of the following?
- A. The Department of Economic Affairs, Ministry of Finance
- B. The Department for Promotion of Industry and Internal Trade
- C. The Foreign Exchange Department, Reserve Bank of India
- D. The Department of Commerce, Ministry of Commerce and Industry
Q11. The requirement that entities of countries sharing a land border with India — China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar and Afghanistan — may invest only under the Government route was given legal force in 2020 through which one of the following?
- A. The Foreign Exchange Management (Overseas Investment) Rules, 2022
- B. The Foreign Exchange Management (Borrowing and Lending) Regulations, 2018
- C. The Foreign Exchange Management (Non-Debt Instruments) Amendment Rules, 2020
- D. The Foreign Exchange Management (Mode of Payment and Reporting of Non-debt Instruments) Regulations, 2019
Q12. In India's foreign investment framework, an investment is said to be made through the 'Government route' when it is which one of the following?
- A. An investment requiring the prior approval of the Foreign Exchange Department of the Reserve Bank of India
- B. An investment requiring the prior approval of the Government of India before the investment is made
- C. An investment made by a foreign government, or its sovereign wealth fund, in an Indian company
- D. An investment routed into an Indian company through a government-owned financial intermediary