Correct option is D
The correct answer is (d) Coca-Cola.
- After the formation of the Janata Party government at the Centre in 1977, the government introduced stricter compliance regulations under the Foreign Exchange Regulation Act (FERA), 1973.
- FERA mandated that foreign investors could not own more than 40% equity in Indian enterprises, requiring multinational companies (MNCs) to dilute their ownership.
- Coca-Cola refused to comply with this regulation, as it did not want to disclose its secret formula for its beverage or transfer significant control to Indian shareholders.
- As a result, Coca-Cola shut down its India operations in 1977 and exited the Indian market.
Information about the other options:
- Unilever: The company complied with FERA regulations and continued its operations in India under Hindustan Unilever Limited (HUL).
- Colgate-Palmolive: This American multinational remained in India by reducing its foreign ownership to comply with FERA regulations.
- Nestlé: The Swiss company also adjusted its stake in India and did not exit the market.
Information Booster:
- Coca-Cola re-entered India in 1993 after the country liberalized its economy under the New Economic Policy (NEP) of 1991, which removed many restrictions on foreign investment.
- The exit of Coca-Cola in 1977 led to the rise of domestic Indian soft drink brands such as Thums Up, Campa Cola, and Gold Spot, which dominated the Indian market until Coca-Cola's return.
- In 1993, Coca-Cola acquired Thums Up from Parle to regain its market share in India.
- A foreign company can hold up to 100% stake in Indian company sectors through the automatic route depending on the Government's FDI policy for that sector., meaning no prior government approval is needed, although specific sectors may have capped ownership limits requiring additional approvals depending on the FDI policy in India.
- Some sectors where 100% FDI is allowed are: Space, manufacturing, civil aviation etc.
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