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    Question

    Between April 2000 and September 2025, services and

    computer software & hardware each accounted for about 16% of total FDI equity inflows, while manufacturing-related sectors such as automobiles and telecom had relatively lower shares.   This pattern most directly reflects:  
    A Structural limitations in India’s manufacturing competitiveness Correct Answer Incorrect Answer
    B Higher elasticity of foreign capital towards scalable, skill-intensive sectors Correct Answer Incorrect Answer
    C Government bias against capital-intensive industries Correct Answer Incorrect Answer
    D Preferential tax treatment exclusively for services Correct Answer Incorrect Answer
    E Lower employment generation potential in manufacturing Correct Answer Incorrect Answer

    Solution

    Foreign investors prefer scalable, skill-intensive, and globally tradable sectors like IT and services, where returns depend more on human capital than physical infrastructure bottlenecks.   This does not imply inherent weakness in manufacturing, but rather relative capital efficiency and risk-return dynamics.  

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