With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?

The correct answer is B. FDI is a largely non-debt creating capital flow. A foreign entity acquires a lasting interest and a degree of management influence in an Indian enterprise, usually through equity, reinvested earnings or intra-company loans with long maturity. Because the money comes in as ownership capital, it does not create a fixed repayment obligation the way external commercial borrowings do. That is why policymakers prefer FDI over debt flows for financing the current account deficit.

Why the others are wrong:

• A describes portfolio investment. FDI is not confined to listed companies. It covers unlisted companies, greenfield projects and wholly owned subsidiaries as well.
• C is wrong because FDI carries no mandatory debt-servicing. Returns come as dividends or profit repatriation, which depend on the company's performance and are not contractual interest payments.
• D describes foreign portfolio investment by FIIs/FPIs in government securities. This is debt-type portfolio flow, not FDI, and it is a classic example of hot money that can leave quickly.

The concept sits in the external sector and the Balance of Payments capital account, and it is central to Mains questions on FDI policy, the Consolidated FDI Policy issued by DPIIT and the FEMA framework. Sectoral caps and routes change from time to time, but the core character of FDI as a non-debt, lasting-interest flow remains the same.

Trap: aspirants mix FDI with FPI because both bring foreign money. Remember that FDI means lasting control or interest, while listed securities and government bonds are portfolio flows.