UPSC Prelims 2021— Question 97

Foreign currency convertible bonds can be treated as foreign investment under specified conditions, foreign institutional investment can qualify as FDI in prescribed circumstances, and global depository receipts can represent foreign investment in Indian companies. Non-resident external deposits are bank deposits and are not themselves FDI. Hence statements 1, 2 and 3 are correct. The final answer-key position for Set C identifies option A as the correct option. Option A — 1, 2 and 3 — is correct because it is the alternative that matches the constitutional, historical, geographical, scientific or economic principle established above. Option B — 3 only — is not correct because it does not satisfy the specific condition tested in the question; it represents an alternative that is contradicted, incomplete, or less precise than the accepted answer. Option C — 2 and 4 — is not correct because it does not satisfy the specific condition tested in the question; it represents an alternative that is contradicted, incomplete, or less precise than the accepted answer. Option D — 1 and 4 — is not correct because it does not satisfy the specific condition tested in the question; it represents an alternative that is contradicted, incomplete, or less precise than the accepted answer. For PYQ interpretation, the distinction between the correct alternative and merely related facts is important. UPSC often places plausible distractors beside the precise statement that matches the underlying rule, chronology, definition or empirical relationship. The answer should therefore be read against the exact wording of the question rather than against a broadly related fact.