FDI AND FII

FDI and FII are both considered to be the investments by an entity based in one country in another country. But there exists a huge difference between the FDI and FII investments.

FDI (Foreign Direct Investment) is an investment by a foreign company in the country, let say India, either by entering in a joint venture with an already established company in India and conducting a business through that company or by setting up a wholly owned subsidiary. On the other hand, FII (Foreign Institutional Investor) investment is an investment by a foreign company in the shares of the company already listed in India.

On the basis of flexibility, FII seems to be more comfortable to the investors than the FDI. One can easily make FII investment and could even withdraw anytime. But FDI investment does not provide such liberty.

FDI is more preferable to the investors than the FII and there are reasons for the same. FDI investment seeks to maximize that enterprise capacity where one invests and to increase production and thereby, boosting economic growth of the same country whereas, FII investment only works by investing in the secondary market and thus, only causes integration of capital in the general market and does not seem to have any goal for a specific enterprise.

FDI bring with itself technological innovations, better production and management techniques and good governance and thus, considered to be more stable than FII. No doubt, FII does the same but does not carry all the benefits that FDI provides.

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