FDI vs FII

The difference between FDI and FII.

Foreign direct investment (FDI) flows into the primary market whereas foreign institutional investment (FII) flows into the secondary market, that is, into the stock market.

All other differences flow from this primary difference. FDI is perceived to be more beneficial because it increases production, brings in more and better products and services besides increasing the employment opportunities and revenue for the Government by way of taxes. FII, on the other hand, is perceived to be inferior to FDI because it only widens and deepens the stock exchanges and provides a better price discovery process for the scrips.

Besides, FII is a fair-weather friend and can desert the nation which is what is happening in India right now, thereby puling down not only our share prices but also wrecking havoc with the Indian rupee because when FIIs sell in a big way and leave India they take back the dollars they had brought in.

Courtesy: The Hindu