c

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 is an outside companies investing in the financial
markets of India.
Refer to for details:
Note: These FAQs are prepared with a view to help FII applicants

c

c




 is the acquisition abroad of physical assets such as plant and
equipment, with operating control residing in the parent corporation.
Refer to for details here:
Foreign direct investment - Wikipedia, the free encyclopedia

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. The impact of the FDI in India is far more than that of FII largely because
the former would generally involve 






  - factories, power plant,
telecom networks, e.t.c. that generates direct employment. There is also multiplier effect on the
back of the FDI because of further domestic investment in downstream and upstream projects and
a host of other services.
The best example of FDI is Maruti Suzuki. India's experience in the automobile sector with Suzuki
ushering in the modern car on Indian roads - that has been a force multiplier for the whole
automobile sectors - can be seen as a typical example of the collateral benefit of FDI.

However, the downside is that it puts an impact on local entrepreneur. Therefore it is advisable
that the FDI should ensure minimum level of local content, have export commitment and
technology transfer to India.

c
too gives large chunks of capital by way of market. The indirect benefits of the market would
include alignment of local practices to international standards in trading, risk management, new
instruments and equities research thus facilitating market to become more deep, liquid, feeding in
more information into prices resulting in a better allocation of capital to globally competitive
sectors of the economy.
While these portfolio flows can technically reverse at any time, given that the surfeit of
international capital chase growth, as long as the host country follows sensible economic policies,
this risk is not as high as it is frequently made out to be. The Indian experience over the last
decade and a half -despite economic slow downs, war, droughts, floods, political uncertainties and
a nuclear test - bears testimony to this.

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Apart from
this distinction there is hardly any big difference between the two forms of capital.











 









 







 












 








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c  A
capital deficient country like India would need to balance the distribution of foreign liabilities
between FDI, FII and debt while trying to attract foreign capital to supplement domestic savings.

I agree there are lot of confusion between FII and FDI and which has created so many rules and
regulations. For example investment by financial institutions under FII may sometime involve
participation in management and in transfer of technology, in developing new export market and
also in upgrading management capabilities.

Thus merger proposal presently under consideration of the Government is worthy of support.