Directions: In each of the following questions a short passage is...

Directions: In each of the following questions a short passage is given with one of the lines in the passage missing and represented by a blank. Select the best out of the five answer choices given, to make the passage complete and coherent (coherent means logically complete and sound).

Investment is necessary for economic growth. It could be undertaken by domestic or foreign investors. _________________________________. If domestic investment is not forthcoming, either because of a profitability crisis in the private sector or a self-imposed restraint on public spending (example, India’s Fiscal Responsibility and Budget Management Act), then we may be forced to attract foreign investment. In other words, in the event of a domestic investment crunch, relying on foreign investment is an option in the short term.

Options

A
However, relying on foreign investment in the long term is not an economically sound policy.
B
However, a probable positive consequence of foreign investment is the inflow of new technology and its subsequent diffusion.
C
However, there are no a priori reasons for favouring foreign investment over domestic investment under normal economic conditions.
D
However, one central character of private investment makes it unreliable in the long term: volatility.

Correct answer

However, there are no a priori reasons for favouring foreign investment over domestic investment under normal economic conditions.

Step-by-step solution

We can observe that the sentence following the blank mentions ‘domestic investment’ as a first priority as far as investment is concerned, the only option that fills the blank appropriately is option C.

Option C is hence the correct answer.

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