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What is the difference between FDI And FII?
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What is the difference between FDI And FII?
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What is the difference between FDI And FII?
FDI vs FII
Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) are two important terms in the field of international finance. While both refer to investment made in a foreign country, there are some key differences between them.
Definition of FDI and FII
- FDI refers to the investment made by a company from one country into another country, with the aim of establishing a long-term business interest in the country where the investment is made.
- FII refers to the investment made by an individual or an institutional investor (like mutual funds, hedge funds, etc.) in the securities of a foreign company, without any intention of establishing a long-term business interest in the country.
Nature of Investment
- FDI involves the transfer of ownership and control, as the investing company takes a significant stake in the foreign company or sets up a subsidiary in the foreign country.
- FII involves the purchase of securities like stocks, bonds, etc., and does not involve any transfer of ownership or control.
Risk and Return
- FDI is considered to be a riskier investment as it involves a greater level of commitment and investment in the foreign country. However, it also offers higher returns in the long run.
- FII is considered to be a less risky investment as it offers more flexibility and can be easily divested. However, the returns on FII investments are generally lower than those on FDI investments.
Impact on the Economy
- FDI is generally seen as a positive development for the host country as it brings in new capital, technology, and expertise, and creates employment opportunities.
- FII is seen as a more volatile source of capital as it can quickly move in and out of a country, leading to fluctuations in the stock market and currency exchange rates.
Regulation and Control
- FDI is subject to more regulations and restrictions, as it involves a higher level of investment and control in the foreign country.
- FII is subject to fewer regulations and restrictions, as it involves a lesser level of investment and control in the foreign country.
Conclusion
In summary, while both FDI and FII involve investment in a foreign country, they differ in terms of the nature of investment, risk and return, impact on the economy, and regulation and control. As such, it is important for investors to carefully consider their investment objectives and the nature of the investment before deciding whether to opt for FDI or FII.
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What is the difference between FDI And FII?
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What is the difference between FDI And FII? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about What is the difference between FDI And FII? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is the difference between FDI And FII?.
What is the difference between FDI And FII? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about What is the difference between FDI And FII? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is the difference between FDI And FII?.
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