__________ is the type of investment in which foreign companies set up plants and factories on their own in India or in collaboration with Indian companies.

Foreign Direct Investment

The correct answer is option (3) : Foreign Direct Investment

1. Foreign Institutional Investment : Foreign investments which come in the form of stocks, bonds, or other financial assets. This form of investment does not entail active management or control over the firms or investors.

2. Foreign Debt Investment: This generally refers to foreign investors investing in a country's debt instruments, like government bonds. It's more about lending money than setting up physical infrastructure.

3. Foreign Direct Investment : Investment of foreign assets into domestic structures, equipment and organisations. It does not include foreign investment into the stock markets. Foreign direct investment is thought to be more useful to a country than investments in the equity of its companies because equity investments are potentially ‘hot money’ which can leave at the first sign of trouble, whereas FDI is durable and generally useful whether things go well or badly.

4. Foreign Capital Investment : The term is not commonly used.