UPSC Prelims 2012— Question 23

The correct answer is option D. Foreign Direct Investment refers to investment by a foreign investor that establishes a lasting interest and significant influence or control in an enterprise in another economy. Subsidiaries of foreign companies, majority foreign equity holdings and enterprises financed by foreign companies can therefore represent FDI. Portfolio investment is generally a financial investment without the same managerial-control dimension and is treated separately from FDI. The important Prelims technique here is to evaluate the complete proposition in each option rather than selecting an answer because one phrase sounds familiar. Where the question contains statements, the combination must contain only statements that are fully correct; one over-broad, reversed or historically misplaced statement is enough to eliminate an option. Option A: Incorrect. The option reads: “1, 2 , 3 and 4”. It does not satisfy the question because it either contains a false proposition, excludes a statement that is required, includes an additional statement that is incorrect, or attributes the relevant power, event, mechanism or characteristic to the wrong institution or process. The presence of one generally true phrase does not make the entire option correct. UPSC statement-based questions are deliberately designed so that a partially correct combination can still be eliminated when one component is inaccurate or too absolute. Therefore this option cannot be preferred over option D once the individual statements and the underlying concept are checked. Option B: Incorrect. The option reads: “2 and 4 only”. It does not satisfy the question because it either contains a false proposition, excludes a statement that is required, includes an additional statement that is incorrect, or attributes the relevant power, event, mechanism or characteristic to the wrong institution or process. The presence of one generally true phrase does not make the entire option correct. UPSC statement-based questions are deliberately designed so that a partially correct combination can still be eliminated when one component is inaccurate or too absolute. Therefore this option cannot be preferred over option D once the individual statements and the underlying concept are checked. Option C: Incorrect. The option reads: “1 and 3 only”. It does not satisfy the question because it either contains a false proposition, excludes a statement that is required, includes an additional statement that is incorrect, or attributes the relevant power, event, mechanism or characteristic to the wrong institution or process. The presence of one generally true phrase does not make the entire option correct. UPSC statement-based questions are deliberately designed so that a partially correct combination can still be eliminated when one component is inaccurate or too absolute. Therefore this option cannot be preferred over option D once the individual statements and the underlying concept are checked. Option D: Correct. This option is consistent with the governing concept tested by the question. Its wording either states the relevant fact directly or gives the combination of statements that survives the individual statement checks. It does not introduce an additional condition that changes the meaning of the proposition. In an examination setting, this is the option that remains after eliminating choices containing a false statement, an overstatement, a wrong institutional attribution, or a reversal of cause and effect. The option should therefore be selected on the basis of the substantive rule explained above, not merely because it resembles a familiar textbook phrase. This is also why the distinction between a broadly related fact and the precise fact asked by UPSC matters. Exam takeaway: isolate the tested constitutional provision, historical event, scientific mechanism, economic definition or geographical relationship first; then test every option against that core. Avoid treating absolute words such as ‘only’, ‘all’, ‘always’, ‘completely’ or ‘any’ as harmless. Such qualifiers often convert an otherwise plausible statement into an incorrect one. This method is especially useful for statement-combination questions and helps reduce dependence on memorized answer keys.