CBSE 2025, Set 2

Question

(a) "The Indian economy has witnessed a sharp turnaround during 2023-24 with Foreign Direct Investments (FDI) inflows of US \$ 70.9 Bn and net Foreign Portfolio Investments (FPI) inflows of US $ 32.4 Bn."

(i) Distinguish between the above mentioned economic variables.
(ii) In which account of Balance of Payments will the given variables be entered and why?

Edvaya · Accepted Answer

The correct answer is Subjective. **(i)** **Foreign Direct Investment (FDI)** refers to direct investment from abroad in physical assets with a considerable degree of influence and control over the firm. Whereas; **Foreign Portfolio Investment (FPI)** refers to investment from abroad in stocks, bonds or other financial assets and do not entail active management or control over the firm. **(ii)** The given variables will be entered in the **Capital account** of the Balance of Payments. Capital Account records all international transactions that cause a change in the assets or liabilities of the residents of a country or its government.

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Economics > Introductory Macroeconomics > Balance Of Payments

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