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Under India's FDI policy, what is meant by the 'automatic route'?

Under the automatic route, a foreign investor can invest in an eligible Indian sector without prior government approval. The Indian investee company only has to make the required filings and reports to the Reserve Bank of India after the investment is made.

  1. AInvestment needs prior approval of the concerned ministry through the Foreign Investment Facilitation Portal
  2. BInvestment is allowed without prior government approval, with only post-investment reporting to the Reserve Bank of IndiaCorrect
  3. CInvestment is allowed only through the stock exchanges
  4. DInvestment is permitted only for non-resident Indians

Explanation

Under the automatic route, a non-resident investor or the Indian company need not obtain prior government approval; reporting to RBI after the investment is required. Prior approval describes the government route, which is the main distractor.

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