MCQs on Role of FDI in India’s Economic Development

What does FDI stand for?
- a) Foreign Direct Investment
- b) Foreign Development Investment
- c) Free Direct Investment
- d) None of the above
  Answer: a) Foreign Direct Investment
Which year marked a significant liberalization of FDI policies in India?
- a) 1991
- b) 2000
- c) 2005
- d) 2010
  Answer: a) 1991
What is the main purpose of attracting FDI in India?
- a) To control inflation
- b) To enhance foreign exchange reserves
- c) To boost economic growth and development
- d) To reduce trade deficits
  Answer: c) To boost economic growth and development
Which sector has received the highest FDI inflows in India in recent years?
- a) Agriculture
- b) Telecommunications
- c) Information Technology
- d) Real Estate
  Answer: b) Telecommunications
Which of the following is a benefit of FDI in India?
- a) Job creation
- b) Increased capital inflow
- c) Technology transfer
- d) All of the above
  Answer: d) All of the above
What is the maximum percentage of FDI allowed in the defense sector in India?
- a) 26%
- b) 49%
- c) 74%
- d) 100%
  Answer: b) 49%
Which Indian body is primarily responsible for regulating FDI?
- a) Reserve Bank of India (RBI)
- b) Ministry of Finance
- c) Department for Promotion of Industry and Internal Trade (DPIIT)
- d) Securities and Exchange Board of India (SEBI)
  Answer: c) Department for Promotion of Industry and Internal Trade (DPIIT)
Which of the following is a challenge associated with FDI in India?
- a) Capital outflow
- b) Dependence on foreign investors
- c) Technology dependence
- d) All of the above
  Answer: d) All of the above
Which of the following policies has facilitated FDI in India?
- a) Make in India
- b) Digital India
- c) Skill India
- d) All of the above
  Answer: d) All of the above
What is the FDI limit in the insurance sector in India?
- a) 26%
- b) 49%
- c) 74%
- d) 100%
  Answer: c) 74%
Which region has been the largest source of FDI for India?
- a) Europe
- b) North America
- c) Asia
- d) Middle East
  Answer: b) North America
Which of the following is NOT a form of FDI?
- a) Greenfield Investment
- b) Brownfield Investment
- c) Portfolio Investment
- d) Joint Ventures
  Answer: c) Portfolio Investment
What is the primary goal of the ‘Make in India’ initiative?
- a) Encourage foreign investment
- b) Boost exports
- c) Create jobs
- d) All of the above
  Answer: d) All of the above
Which factor makes India an attractive destination for FDI?
- a) Large consumer market
- b) Skilled workforce
- c) Political stability
- d) All of the above
  Answer: d) All of the above
In which sector is 100% FDI allowed under the automatic route?
- a) Agriculture
- b) Retail
- c) Biotechnology
- d) Railways
  Answer: c) Biotechnology
Which of the following is a concern regarding FDI in India?
- a) Environmental degradation
- b) Social inequality
- c) Market monopolies
- d) All of the above
  Answer: d) All of the above
Which year did India rank 100th in the Ease of Doing Business Index?
- a) 2017
- b) 2018
- c) 2019
- d) 2020
  Answer: b) 2018
FDI in India is classified into which two categories?
- a) Public and Private
- b) Direct and Indirect
- c) Automatic and Government Route
- d) Domestic and Foreign
  Answer: c) Automatic and Government Route
What is the role of the Foreign Investment Promotion Board (FIPB) in India?
- a) Regulating foreign banks
- b) Approving FDI proposals
- c) Setting exchange rates
- d) Managing international trade
  Answer: b) Approving FDI proposals
Which of the following initiatives aims to improve India’s infrastructure to attract FDI?
- a) Smart Cities Mission
- b) Skill India
- c) Pradhan Mantri Awas Yojana
- d) All of the above
  Answer: a) Smart Cities Mission
FDI is considered a crucial component of which economic model?
- a) Import Substitution
- b) Export-Led Growth
- c) Mixed Economy
- d) Closed Economy
  Answer: b) Export-Led Growth
Which global organization assesses the investment climate of countries including India?
- a) World Bank
- b) International Monetary Fund (IMF)
- c) World Trade Organization (WTO)
- d) Organisation for Economic Co-operation and Development (OECD)
  Answer: a) World Bank
Which law governs foreign investment in India?
- a) Foreign Exchange Management Act (FEMA)
- b) Companies Act
- c) Industrial Disputes Act
- d) Securities Contract (Regulation) Act
  Answer: a) Foreign Exchange Management Act (FEMA)
Which Indian state has emerged as a popular destination for FDI due to its business-friendly environment?
- a) Bihar
- b) Maharashtra
- c) Himachal Pradesh
- d) Uttar Pradesh
  Answer: b) Maharashtra
What is one of the primary motivations for countries to invest FDI in India?
- a) Rich cultural heritage
- b) High literacy rate
- c) Liberalized trade policies
- d) Geographic diversity
  Answer: c) Liberalized trade policies
What percentage of FDI is allowed in the multi-brand retail sector?
- a) 26%
- b) 51%
- c) 74%
- d) 100%
  Answer: b) 51%
Which of the following sectors is restricted for FDI?
- a) Telecommunications
- b) Broadcasting
- c) Insurance
- d) Atomic Energy
  Answer: d) Atomic Energy
Which Indian initiative promotes foreign technology transfer through FDI?
- a) Make in India
- b) Digital India
- c) Skill India
- d) Startup India
  Answer: a) Make in India
What is one potential negative impact of FDI on local industries?
- a) Technology upgradation
- b) Increased competition
- c) Monopoly power
- d) Employment generation
  Answer: c) Monopoly power
Which of the following statements is true regarding FDI?
- a) It always leads to profit repatriation.
- b) It can create a positive impact on local economies.
- c) It has no influence on domestic businesses.
- d) It only benefits foreign companies.
  Answer: b) It can create a positive impact on local economies.

These MCQs can help candidates prepare for the Civil Services Examination by enhancing their understanding of FDI’s role in India’s economic development.

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