Foreign direct investment (FDI) in several sectors in India is still heavily reg

Question

Foreign direct investment (FDI) in several sectors in India is still heavily regulated. After much debate, the govemment 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 govenment's Working Group on Foreign Direct Investment. 20. What would you suggest o the govenment based on the discusions in this chapter? O A. 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. B. Continue to restrict FDI in the areas noted, because the strategic value of these industries O C. Allow more FDI, because the resulting technology transfer would bring increased efficiency and D. More FDI should be allowed, because the increased capital nows would allow businesses to outweighs any benefits that might come from increased FDI benefit India. borrow more to expand.

Explanation / Answer

20. Option B

Explanation: It is beneficial for a country to restrict FDI in strategically important sectors like defense. This is related to national security. The gain from FDI in these sectors is less than the potential loss due to a compromise in national security.

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