Investments by one indian company in another indian company is known as:

The correct answer is Downstream investment.

Key Points

• Downstream investment refers to investments made by one company into another company within the same country, specifically in sectors such as infrastructure, manufacturing, or services.
• It commonly occurs when a parent company invests in its subsidiaries or associate companies within the same domestic market.
• The term is widely used in India to define the process of internal financial flow between domestic entities, regulated by the Reserve Bank of India (RBI).
• This type of investment is in contrast to "upstream investments," which often involve international or cross-border financial flows.
• In India, downstream investments are subject to sectoral caps and conditions as per the Foreign Exchange Management Act (FEMA) and Consolidated FDI Policy.

Additional Information

• Upstream Investment:
  • Upstream investments involve the initial stages of the supply chain, such as resource extraction or production.
  • These investments are typically associated with industries like oil and gas exploration and mining.
• Direct Investment:
  • Direct investment refers to the investment made by an entity in the business interest of another entity, often in the form of equity capital, loans, or other financial instruments.
  • Foreign Direct Investment (FDI) and Domestic Direct Investment (DDI) are two common types.
• Indirect Investment:
  • Also known as portfolio investment, it involves investing in financial assets like stocks and bonds rather than physical assets or direct business ventures.
  • It is less involved in the day-to-day operations of the company being invested in.
• FEMA Guidelines on Downstream Investment:
  • The Foreign Exchange Management Act (FEMA) provides the legal framework for regulating downstream investments in India.
  • It ensures compliance with sectoral caps and conditions for investments in specific industries.