Both Foreign Direct Investment (FDI) and Foreign Institutional Investor (FII) are related to investment in a country. Which one of the following statements best represents an important difference between the two ? [UPSC 2011]
FII helps bring better management skills and technology, while FDI only brings in capital
Incorrect AnswerFII helps in increasing capital availability in general, while FDI only targets specific sectors.
Correct AnswerFDI flows only into the secondary market while FII targets primary market
Incorrect AnswerFII is considered to be more stable than FDI.
Incorrect AnswerExplanation:
FDI
•The Foreign Direct Investment refers to the direct investment into the production and management.
•This can be one by either buying a company or by expanding operations of an existing business.
•This means that FDI brings foreign capital, technology & management.
FII
•FII (Foreign Institutional Investment) and FPI (Foreign Portfolio Investment) are same things.
•The foreign institutions invest in a capital / money market which is not their home country.
•Such kinds of investments are seen in the Mutual Funds, Investment Companies, Pension Funds and Insurance Houses. This means that FII/ FPI brings only capital. FII is also called Foreign Indirect Investment.
![]()
By: Abhishek Sharma