The correct answer is FDI
Key Points
- Foreign Direct Investment (FDI) is the officially recognized method of foreign capital inflow into India — it is an investment by a person or firm abroad directly into Indian business equity, plants, or assets.
- FDI comes via the automatic route (no prior approval needed) or the government route (requiring approval).
- In India’s Balance of Payments classification, major capital inflows are FDI, Portfolio Investment (FPI), External Commercial Borrowings (ECBs), and NRI Deposits.
Each is recorded separately; FDI is distinct.
- NRI accounts are banking channels that NRIs may use to invest, but they are not defined as a category of foreign capital inflow — they’re just one possible banking route, mainly for deposits.
Important Points
- FDI:
- Investment through equity instruments by a person resident outside India into an Indian company.
- Purpose: to obtain lasting interest and influence management or control.
- Routes: Automatic and Government approval.
- NRI Accounts (NRE/NRO/FCNR):
- NRE: Non-Resident External Account — rupee denominated; funds fully repatriable; can be used by NRIs to invest but is not the definition of FDI.
- NRO: Non-Resident Ordinary Account — rupee denominated; used for income earned in India; limited repatriability.
- FCNR(B): Foreign Currency Non-Resident account — foreign currency deposits by NRIs/PIOs.