Difference between FDI and FII or FPI

Economy and Finance

Difference between FDI and FII or FPI

08 Jun 2023 Zinkpot 165

BASIS	FDI	FII or FPI
DEFINITION	Foreign Direct Investment (FDIs) is an investment made by company or an individual of a country into business interests located in another country.	Foreign institutional or Portfolio investors (FIIs/FPIs) are typically those investors, or an investment fund, or an asset that invests in a foreign country outside of the one where it is headquartered or registered. In India, FII is used for overseas entities that invest in the Indian financial markets.
Focus Area	Basically, FDI is when a company situated in one country makes an investment in a company situated abroad.	On the other hand, FII is when foreign companies make investments in the stock market of a company of an another country.
Tenure of Investment	The investment by FDI is usually for long-term	Investment by FII is mostly for the short-term.
Ease of investment	Under FDI, it is not easy for an investor to enter and exit the investment.	Investors can easily enter and exit the market when investment is made through FII
Nature of investment	FDI investments do more than just transfer money. It involves movement of resources, technologies, technical know-how, skills, and strategies, among other things.	FII typically involves the transfer of funds alone into shares, bonds, securities and others.
Impacts on the economy	FDI increases employment opportunities and the GDP of the reveiving country. FDI promotes economic growth.	FII only increases the country’s capital and market capitalization of a country's stock market.
Control over the company	FDIs typically targets specific companies and also obtain the investee company’s management control, if investment is huge.	In the case of FIIs, investors don't exert any control on the management because mostly there are minor equity holders.
Types of Markets	FDI flows into the primary market	FII flows into both the primary and the secondary market
Example	Amazon, Microsoft	GQG Partners, Blackstone investments

India’s advantageous demography and steady growth trajectory make it an appealing destination for foreign investment. In last two decades, India has attracted over US $919.63 billion in total FDI.

India received a record FDI inflow of approximately US$84.8 billion in the fiscal year (FY) 2022, including US$7.1 billion in FDI equity inflows in the services sector.

The total FDI inflows received in FY 2023, which includes equity inflows, reinvested earnings, and other capital sources, amounted to US$70.97 billion – a decrease from the US$84.83 billion recorded during FY 2022.