Mass Communication and Journalism 2016 Solved Paper

Read the given passage very carefully and then choose the most suitable option of the questions that follow.
India’s inward investment regime went through a series of changes since economic reforms were ushered in two decades back. The expectation of the policy makers was that an ‘investor friendly’ regime will help India establish itself as a preferred destination of foreign investors. These expectations remained largely unfulfilled despite the consistent attempts to increase the attractiveness of India by further changes in policies that included opening up of individual sectors, lowering the hitherto existing caps on foreign holding and improving investment procedures. This paper is an attempt to explain this divergence from the earlier trend. At the outset, this study dwells on the ambiguities surrounding the definition of FDI and the non-adherence to international norms in measuring the FDI inflows by India. The study finds that portfolio investors and round-tripping investments have been important contributors to India’s reported FDI inflows thus, blurring the distinction between direct and portfolio investors on the one hand and foreign and Based on Memory domestic investors on the other. These investors were also the ones, who have exploited the tax haven route the most. In most countries, particularly those that have faced chronic current account deficits, obtaining ‘stable’ long-term FDI flows was preferred over 'volatile1 portfolio investments. This distinction between long-term FDI and volatile portfolio investments has been now removed in the accepted official definition of FDL
From an analytical point of view, the blurring of the lines between long-term FDI and the volatile portfolio investments has meant that the essential characteristics of FDI, especially the positive spill-overs that the long-term FDI was seen to result in, are being overlooked. FDI that is dominated by financial investments, though a little more stable than the portfolio investments through the stock market, cannot deliver the perceived advantages of FDL The consequence is a double whammy, while much of the capital inflows recorded as FDI cannot enhance India’s ability to earn foreign exchange through exports of goods and services, large inflows of portfolio capital cause currency appreciation and thus, erode the competitiveness of domestic players.