CSEET · Economic and Business Environment · Global Environment
A foreign company wants to invest in an Indian company through a sector where FDI is permitted only under the government route. Which statement is correct?
Under the government route, the foreign investor must obtain prior approval from the concerned administrative ministry or department before investing. This differs from the automatic route, where no prior approval is needed, and from prohibited sectors where FDI is not allowed at all.
- AThe investment can be made freely, and approval is sought only after the shares are issued
- BThe proposal needs prior government approval, processed through the administrative ministry or department concerned, before the investment is madeCorrect
- CThe investment is prohibited in every case
- DOnly the Reserve Bank of India may approve it, without any ministry involvement
Explanation
In the government route, the proposal is examined and approved by the concerned administrative ministry or department before investment. Post-facto reporting is the automatic route feature. Government route sectors are not prohibited, which is a separate category, and RBI alone does not approve.
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