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Foreign Portfolio Investment (FPI) is a significant route for foreign investment. FPIs have made a strong comeback after the COVID-19-induced slump. However, the recent tightening of disclosure norms by the Securities and Exchange Board of India (SEBI) may pose challenges for foreign investors. Examine.

Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

5. Foreign Portfolio Investment (FPI) is a significant route for foreign investment. FPIs have made a strong comeback after the COVID-19-induced slump. However, the recent tightening of disclosure norms by the Securities and Exchange Board of India (SEBI) may pose challenges for foreign investors. Examine. (250 words)

Difficulty level: Tough

Reference: Indian Express

Why the question:

The article discusses the resurgence of foreign investors in the Indian stock market.

Key Demand of the question:

To write about FPI, its importance and increased trends in FPIs and bottlenecks for FPIs in India.

Directive word: 

Examine – When asked to ‘Examine’, we must investigate the topic (content words) in detail, inspect it, investigate it and establish the key facts and issues related to the topic in question. While doing so we should explain why these facts and issues are important and their implications.

Structure of the answer:

Introduction: 

Begin by defining FPI. Cite statistic related to the extent of FPI in India.

Body:

In the first part, write about importance of FPI as mode of investment and its importance to the Indian economy.

Next, give context regarding the increased inflows of FPI, potential bottlenecks for it and steps that are needed to resolve them.

Conclusion:

Conclude with a way forward to ensure that withdrawal of FPI does not affect the economy.