Question:
Using suitable example, distinguish between Foreign Direct Investments (FDI) and Foreign Institutional Investments (FII).
Using suitable example, distinguish between Foreign Direct Investments (FDI) and Foreign Institutional Investments (FII).
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FDI = Long-term + Control. FII = Short-term + No control.
Updated On: Jul 25, 2025
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Solution and Explanation
| Basis | Foreign Direct Investment (FDI) |
|---|---|
| Meaning | Investment made by a foreign company in physical assets like land, building, plant and machinery in another country. |
| Example | Establishment of a manufacturing unit in India by Toyota. |
| Nature | Long-term investment aimed at ownership and control. |
| Stability | Relatively stable and less volatile. |
| Basis | Foreign Institutional Investment (FII) |
|---|---|
| Meaning | Investment in financial assets like shares and bonds by foreign institutions. |
| Example | A foreign hedge fund buying shares in Indian stock market. |
| Nature | Portfolio investment without control. |
| Stability | More volatile and sensitive to market trends. |
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