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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?
- a)FII helps bring better management skills and technology, while FDI only brings in the capital.
- b)FII helps in increasing capital availability in general, while FDI only targets specific sectors.
- c)FDI flows only into the secondary market while FII targets primary market
- d)FII is considered to be more stable than FDI.
Correct answer is option 'B'. Can you explain this answer?
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Both Foreign Direct Investment (FDI) and Foreign Institutional Invest...
- Foreign Direct Investment only targets a specific enterprise. It aims to increase the enterprise's capacity or productivity or change its management control.
- The FII investment flows only into the secondary market. It helps in increasing capital availability in general rather than enhancing the capital of a specific enterprise.
- The Foreign Direct Investment is considered to be more stable than Foreign Institutional Investor. FDI not only brings in the capital but also helps in good governance practices and better management skills and even technology transfer.
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Explanation:
Foreign Direct Investment (FDI) and Foreign Institutional Investor (FII) are both related to investment in a country. However, there are important differences between the two. The statement that best represents one of these differences is option B, which states that FII helps in increasing capital availability in general, while FDI only targets specific sectors.
FDI:
- FDI refers to the investment made by a foreign company or individual directly into a country's business or production facilities.
- FDI involves the establishment of a physical presence in the country, such as setting up factories, offices, or subsidiaries.
- FDI is typically a long-term investment and often involves significant capital investment.
- FDI is aimed at acquiring ownership or controlling interest in a company or business in the host country.
FII:
- FII refers to the investment made by foreign institutional investors, such as mutual funds, hedge funds, and pension funds, in the financial markets of a country.
- FII does not involve the establishment of a physical presence in the country.
- FII is a short-term investment and involves buying and selling of securities such as stocks, bonds, and derivatives.
- FII is aimed at taking advantage of the financial markets and generating returns on investment.
Difference:
The important difference between FDI and FII, as stated in option B, is that FII helps in increasing capital availability in general, while FDI only targets specific sectors. This means that FII investments are more focused on providing liquidity and capital to the overall financial markets of a country, whereas FDI investments are targeted towards specific industries or sectors.
Benefits of FII:
- FII investments can help in increasing liquidity in the financial markets and provide capital for companies to expand and grow.
- FII investments can also help in stabilizing the financial markets and attracting more foreign investors.
Benefits of FDI:
- FDI investments can bring in capital, technology, and management skills that may be lacking in the host country.
- FDI investments can create jobs, promote economic growth, and transfer knowledge and technology to the local industries.
In conclusion, the main difference between FDI and FII is that FII helps in increasing capital availability in general, while FDI only targets specific sectors. Both types of investments have their own benefits and contribute to the economic development of a country.
Foreign Direct Investment (FDI) and Foreign Institutional Investor (FII) are both related to investment in a country. However, there are important differences between the two. The statement that best represents one of these differences is option B, which states that FII helps in increasing capital availability in general, while FDI only targets specific sectors.
FDI:
- FDI refers to the investment made by a foreign company or individual directly into a country's business or production facilities.
- FDI involves the establishment of a physical presence in the country, such as setting up factories, offices, or subsidiaries.
- FDI is typically a long-term investment and often involves significant capital investment.
- FDI is aimed at acquiring ownership or controlling interest in a company or business in the host country.
FII:
- FII refers to the investment made by foreign institutional investors, such as mutual funds, hedge funds, and pension funds, in the financial markets of a country.
- FII does not involve the establishment of a physical presence in the country.
- FII is a short-term investment and involves buying and selling of securities such as stocks, bonds, and derivatives.
- FII is aimed at taking advantage of the financial markets and generating returns on investment.
Difference:
The important difference between FDI and FII, as stated in option B, is that FII helps in increasing capital availability in general, while FDI only targets specific sectors. This means that FII investments are more focused on providing liquidity and capital to the overall financial markets of a country, whereas FDI investments are targeted towards specific industries or sectors.
Benefits of FII:
- FII investments can help in increasing liquidity in the financial markets and provide capital for companies to expand and grow.
- FII investments can also help in stabilizing the financial markets and attracting more foreign investors.
Benefits of FDI:
- FDI investments can bring in capital, technology, and management skills that may be lacking in the host country.
- FDI investments can create jobs, promote economic growth, and transfer knowledge and technology to the local industries.
In conclusion, the main difference between FDI and FII is that FII helps in increasing capital availability in general, while FDI only targets specific sectors. Both types of investments have their own benefits and contribute to the economic development of a country.
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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?a) FII helps bring better management skills and technology, while FDI only brings in the capital.b) FII helps in increasing capital availability in general, while FDI only targets specific sectors.c) FDI flows only into the secondary market while FII targets primary marketd) FII is considered to be more stable than FDI.Correct answer is option 'B'. Can you explain this answer?
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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?a) FII helps bring better management skills and technology, while FDI only brings in the capital.b) FII helps in increasing capital availability in general, while FDI only targets specific sectors.c) FDI flows only into the secondary market while FII targets primary marketd) FII is considered to be more stable than FDI.Correct answer is option 'B'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about 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?a) FII helps bring better management skills and technology, while FDI only brings in the capital.b) FII helps in increasing capital availability in general, while FDI only targets specific sectors.c) FDI flows only into the secondary market while FII targets primary marketd) FII is considered to be more stable than FDI.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for 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?a) FII helps bring better management skills and technology, while FDI only brings in the capital.b) FII helps in increasing capital availability in general, while FDI only targets specific sectors.c) FDI flows only into the secondary market while FII targets primary marketd) FII is considered to be more stable than FDI.Correct answer is option 'B'. Can you explain this answer?.
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