FDI vs FII

Both FDI and FII is related to investment in a foreign country. FDI or Foreign Direct Investment is an investment
that a parent company makes in a foreign country. On the contrary, FII or Foreign Institutional Investor is an
investment made by an investor in the markets of a foreign nation.In FII, the companies only need to get
registered in the stock exchange to make investments. But FDI is quite different from it as they invest in a foreign
nation.
The Foreign Institutional Investor is also known as hot money as the investors have the liberty to sell it and take it
back. But in Foreign Direct Investment, this is not possible. In simple words, FII can enter the stock market easily
and also withdraw from it easily. But FDI cannot enter and exit that easily. This difference is what makes nations to
choose FDIs more than then FIIs.
FDI is more preferred to the FII as they are considered to be the most beneficial kind of foreign investment for the
whole economy.
Foreign Direct Investment only targets a specific enterprise. It aims to increase the enterprises capacity or
productivity or change its management control. In an FDI, the capital inflow is translated into additional production.
The FII investment flows only into the secondary market. It helps in increasing capital availability in general rather
than enhancing the capital of a specific enterprise.
The Foreign Direct Investment is considered to be more stable than Foreign Institutional Investor. FDI not only
brings in capital but also helps in good governance practises and better management skills and even technology
transfer. Though the Foreign Institutional Investor helps in promoting good governance and improving accounting,
it does not come out with any other benefits of the FDI.
While the FDI flows into the primary market, the FII flows into secondary market. While FIIs are short-term
investments, the FDIs are long term.
On Conclusion, Foreign Direct Investment (FDI) flows into a company's assets, fuels production, employment,
taxes and growth, etc. Where as Foreign Institutional Investment (FII) flows into the secondary market, that is,
stock exchanges. While both are important, FDI has a special importance for a developing country such as India.
The FIIs, has added depth and substance stock market.
Summary
1. FDI is an investment that a parent company makes in a foreign country. On the contrary, FII is an investment
made by an investor in the markets of a foreign nation.
2. FII can enter the stock market easily and also withdraw from it easily. But FDI cannot enter and exit that easily.
3. Foreign Direct Investment targets a specific enterprise. The FII increasing capital availability in general.
4. The Foreign Direct Investment is considered to be more stable than Foreign Institutional Investor

FII and FDI connection---The relationship between FII and FDI (Foreign Direct Investment) is intertwined. In
1998 1999 a number of reforms were initiated, that were designed specifically for attracting FDI. In India FDI is
allowed through FIIs. This is done through private equity, preferential allotment, joint ventures and capital market
operations. The only industries in which FDI isnt allowed are arms, railways, coal, nuclear and mining. 100%
financing by FDI is allowed in infrastructural projects such as construction of the bridges and the tunnels. In the
financial sector, insurance and banking operations can have foreign investors.

ExamplesBasically FDI is the Foreign Direct Investment in a foreign country to get at least 10% of voting stocks.
It increases the management interest in the enterprise of the other country. In very simple words, FDI is an
investment which a parent enterprise made in a foreign country. For example, Multinational companies present the
best examples of FDI like Telenor, the seventh largest company in the world has a number of companies in
various countries. The daughter companies of Telenor Group act as the FDI for the host countries. In most of the
states there is an FDI board which is responsible to handle FDI coming in the country like in India, one of the
attractive FDI country, there is Foreign Investment Promotion Board (FIPB). On the other hand in FII, Foreign
Institutional Investors, foreign investors invest in the markets of aforeign country for example, insurance
companies, investment companies, charitable organizations etc. The concept of FII is very common in India. Such
companies are just required to register on the stock exchange or in the markets to make investments and there is
no board controlling it.

FDI and FII: how impact to Indian economy

Factors affecting the FII
1.INTEREST RATE OF THE COUNTRY: if the interest rate of the country high of course FII will want to
invest in that country to make good capital gain.
2.MONEY SUPPLY AND INFLATION RATE: if money supply is adequate and inflation rate is stable FII will
invest in that country.
3.EXCHANGE RATE OF THE COUNTRY: if the exchange rate of country is highly volatile or fluctuate of
course FII will be discourage to invest in that country. So exchange rate should be stable.
4.BOP: deficit in balance of payment is the indicator. So FII will avoid investing in that country.
5.ECONOMIC GROWTH: of course FII will invest in those countries which are growing at fast rate like India,
china and Korea.
FDI
In India FDI is regulated by RBI, ministry of finance and FIPB.
Impact on Indian economy.1.Creates employment opportunity for domestic country.
2.Good relation between two countries.
3.Modern technology.
4.Inflow of foreign funds in Indian economy.
5.To provides the goods and services at best suitable price.
6.It creates the competition among the domestic company and MNC in this way domestic co can increase
their efficiency.
7.Indian company get chance to work professional body.
8.Indian company get chance to work with world market Leader Company.
9.Backward area can be developed.
10.Creating good capital market in India.
11.Government earns in the form of licenses fees, registration fees, taxes which is spend for public
expenditure.
Problem facing the MNC at the time of investing in other country-

1.Communication problem
2.They will have to find new supplier and distributors.
3.Political problem : for e .g. if any Pakistan company want to invest in Indian market of course they will face
problem or difficulty compare to other country
4.Taxation policy of country
5.Exchange rate of home country
difference between FII and FDI
Meaining :
FDI : : if any foreign entity or investor obtain or acquire the controlling interest
FII :If any foreign investor want make capital gain and that is for short duration
Duration :
FDI : long period
FII short period.
Source :
FDI : FDI come from MNCs and corporate so as to derive benefit of new market , cheaper resource ,
efficiency and skill etc
FII: FII come from investor, mutual fund company, portfolio management and corporate with pure motive of
investment gains.
Form :
FDI : FDI generally comes as subsidiary company or joint venture
FII:It comes through stock market
Regulator body :
FDI : RBI , ministry of finance and FIPB( foreign investment promotion board )
FII: SEBI ( security exchange board of India )
Purpose
FDI : : diversification and expand at global coverage
FII: FII sole criteria and motive is gains on investment