Difference between FII and FDI

FII and FDI are both types of investment in a country's economy, but there are some key differences between them:

Definition: FII stands for Foreign Institutional Investment, which refers to investments made by foreign institutional investors, such as mutual funds, hedge funds, pension funds, etc., in the securities markets of a country. On the other hand, FDI stands for Foreign Direct Investment, which refers to investments made by foreign companies or individuals in a country's physical assets, such as factories, real estate, etc.


Purpose: The purpose of FII is primarily to make profits from the short-term fluctuations in the securities markets. In contrast, the purpose of FDI is to establish a long-term presence in a country's economy by acquiring assets and building a business.


Control: FII investors do not have control over the companies in which they invest, as they only invest in securities. However, FDI investors acquire control over the assets and operations of the companies they invest in.


Risks: FII investments are generally considered to be riskier than FDI investments, as they are subject to the volatility of the securities markets. FDI investments, on the other hand, are more stable and less prone to short-term fluctuations.


Impact on the economy: FDI investments are generally seen as more beneficial to the economy of a country, as they bring in new capital, technology, and expertise, and create new jobs. FII investments, on the other hand, can be more volatile and may have a negative impact on the economy if they are withdrawn suddenly.