India has a large economy, and to ensure proper balance, different Central Governments have brought in many reforms since independence. Foreign Direct Investment (FDI) and Foreign Institutional Investor (FII) are two prominent terms related to the Indian economy and a play vital role to regulate the money flow and production levels and quality in the country.
Characteristics of FDI
In the case of FDI, a foreign company or an individual invests an amount of money in specific industrial sectors of India. The government sets the FDI norms for different industries in the country.
FDI helps to raise the necessary funds easily which results in outstanding productions. However, the investor gets control over business management.
Characteristics of FII
FII is the type of investment where a foreign institution invests money as an asset in the Indian company. These monetary assets are considered as foreign assets. A Foreign Institutional Investor has the primary lookout to earn quick profits.
The main sectors on which FII is quite common are mutual funds, insurance bonds, debentures, and pension funds etc. Unlike FDI, the FIIs get no managerial control over any Indian company.
Differences between FDI and FII
Following are the differences between FDI and FII with regards to some key aspects:
Market allowance
FDI experiences more barriers in India to make its market presence. Moreover, there are more formalities for FDI to exist in the Indian market. On the other hand, FII can simply get in and out of the market according to their necessities.
Results for the market
In the case of FDI, the Indian market gets a long-term development in the capital inflow. Whereas, the level of FIIs investment depends on the overall economic condition of India. FIIs can get more ROI when the Indian economy is stable.
Though FDI and FII are quite different from each other, both have their vitality in terms of the presence in the Indian market.
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