1. What is the primary difference between FDI (Foreign Direct Investment) and FPI (Foreign Portfolio Investment)?
FDI is debt-creating, FPI is non-debt creating.
FDI is only in government bonds, FPI is in equity.
FDI involves management interest and lasting interest, FPI is purely for financial gain without management control.
FDI is short-term, FPI is long-term.
Explanation:
FDI indicates a long-term interest and control (usually >10% stake), whereas FPI involves buying shares/bonds for shorter-term gains without seeking control.
2. In the context of globalization, what does "outsourcing" typically involve?
Hiring foreign nationals to work in the home country.
Selling domestic companies to foreign investors.
Restricting imports to protect local jobs.
Obtaining goods or services from an outside or foreign supplier.
Explanation:
Outsourcing involves contracting work out to a third party, often in another country (offshoring), to reduce costs or access specialized skills (e.g., BPO services in India).
3. Consider the following statements regarding Convertibility in India: 1. The Rupee is fully convertible on the Current Account. 2. The Rupee is fully convertible on the Capital Account. Which statement(s) is/are correct?
1 only
Neither 1 nor 2
Both 1 and 2
2 only
Explanation:
India accepted full Current Account Convertibility in August 1994 (adhering to IMF Article VIII). However, Capital Account Convertibility is still partial/managed, with restrictions on debt flows and individual remittances (LRS limits).
4. What does "NEER" stand for in the context of exchange rates?
Nominal Effective Exchange Rate
National Economic Exchange Ratio
New European Exchange Rate
Net External Exchange Rate
Explanation:
NEER is the weighted average of bilateral nominal exchange rates of the home currency in terms of foreign currencies. REER (Real Effective Exchange Rate) adjusts NEER for inflation.