Consider the following statements.

1. Foreign currency convertible bonds

2. Foreign institutional investment with certain conditions

3. Global depository receipts

4. Non-resident external deposits

Which of the above can be included in Foreign Direct Investments?

The correct answer is 1, 2 and 3.

To determine which of the listed items can be included in Foreign Direct Investments (FDI), let us analyze each statement individually:

1. Foreign Currency Convertible Bonds (FCCBs):
FCCBs are corporate bonds issued by a country's company in a foreign currency, which can be converted into equity shares of the issuing company. Because they carry an option to convert into foreign-held equity in the domestic entity, investment through FCCBs is treated as part of Foreign Direct Investment (FDI).

2. Foreign Institutional Investment (FII) with certain conditions:
While general FII is classified as Foreign Portfolio Investment (FPI), under Indian regulatory frameworks (such as the Arvind Mayaram Committee recommendations), if an FII's holding in a single Indian company exceeds a specific threshold (typically 10% or more of the equity shares), it is reclassified and counted as Foreign Direct Investment (FDI).

3. Global Depository Receipts (GDRs):
GDRs are bank-issued certificates representing shares in a foreign company. When foreign investors invest in domestic companies via GDRs, these foreign equity investment inflows are categorized under Foreign Direct Investment (FDI).

4. Non-Resident External (NRE) Deposits:
NRE deposits are foreign currency/rupee accounts opened by Non-Resident Indians (NRIs) in Indian banks. These are bank deposits and represent debt liabilities (banking capital inflows), not equity investment or direct ownership in a business enterprise. Therefore, NRE deposits are excluded from FDI.

Hence, statements 1, 2, and 3 can be included in Foreign Direct Investments, making 1, 2 and 3 the correct combination.