Question

Foreign direct investment​ (FDI) in several sectors in India is still heavily regulated. After much​ debate, the government of India recently relaxed restrictions on FDI in the retail sector. For purported reasons like national security and possible job​ losses, many sectors of the economy such as​ defense, nuclear​ power, and oil refining are not fully open to foreign direct investment. Suppose you are hired to serve on the​ government's Working Group on Foreign Direct Investment.  

What would you suggest to the government based on the discussions in this​ chapter?

A.

Continue to restrict FDI in the areas​ noted, because the strategic value of these industries outweighs any benefits that might come from increased FDI.

B.

More FDI should be​ allowed, because the increased capital flows would allow businesses to borrow more to expand.

C.

Less FDI should be​ allowed, even in​ retail, because the resulting technology transfer would give​ India's competitors a competitive advantage over​ India's businesses.

D.

Allow more​ FDI, because the resulting technology transfer would bring increased efficiency and benefit India.

Answer 1

Ans. D. Allow more​ FDI, because the resulting technology transfer would bring increased efficiency and benefit India. - This would be the most appropriate step for the government because it would benefit the country to a great extent.

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