Foreign Direct Investment (FDI) Explained
Foreign Direct Investment (FDI) is investment made by a foreign entity to acquire a lasting interest and management influence in a business in another country.
Foreign Direct Investment (FDI) is investment made by a foreign entity to acquire a lasting interest and management influence in a business in another country.
Routes of entry
In India, FDI comes in through two routes: the automatic route (no prior government approval needed, within sectoral caps) and the government route (prior approval required for sensitive sectors).
FDI vs FPI
Unlike Foreign Portfolio Investment (FPI), which is passive investment in financial assets, FDI involves control and is considered more stable ('patient capital').
Why it matters for UPSC
The FDI routes and the FDI–FPI distinction are frequently tested Economy facts.
Practise related UPSC PYQs
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Practise PYQs →Frequently asked questions
What are the two routes for FDI in India?
The automatic route and the government (approval) route.
How does FDI differ from FPI?
FDI involves lasting control and management interest, while FPI is passive portfolio investment in financial assets.