In today’s post, we will tell you the Difference Between FDI and FII and what is FDI; if you also want to get information about FDI and FII, you have come to the right place. With this, you will also know what the advantages of FDI are.
FDI Vs. FII also you will know today through this post. We will explain it to you in very simple language. Hope you like all our posts. Likewise, you continued to like every post on our blog.
FDI is essential for the development of the country. Through FDI, the employment sector in the country is expanded. Many foreign companies come and invest in India and take their stake in the Indian company. This also benefits the general public to a great extent.
This also benefits foreign investors. FDI gives the foreign investor a chance to gain in the new market. Rules are made by the government for FDI, keeping in mind the sector and the traders’ activities. FDI is done keeping these rules in mind.
So let’s know what this FDI is; this post to get information about What Is FDI? Must read from beginning to end. You will get complete information about FDI only after reading the post till the end.
What is FDI
Table of Contents
When the investment is made in one country by another country, it is called FDI. This law of India facilitates any non-Indian or non-Indian company. It is also known as foreign investment. An investor who invests in FDI purchases some part of the management of that company. And that investor becomes a member of the management of that company.
The investor can buy the investments of that company, buy bonds or even open their new factory. The investment made by FDI in a company is known as direct investment or direct investment, and the investment made will be treated as FDI only if the investor buys 10% of the company.
FDI Full Form
FOREIGN DIRECT INVESTMENT
Types of FDI
There are mainly two types of FDI, which you are being told further.
Greenfield
Under this, another country can open a new company. If a foreign company opens its new factory by investing in India or opens a new store, it is called a green field. If it wishes, it can also open a subsidiary of the Indian company with full ownership.
Brownfield
Under this field, the investor does not open a separate factory. Instead, he can acquire ownership rights by purchasing only part of the management of the company’s old factory. The foreign company can buy its share in India’s old factory and get its share on its management, which is called brownfield.
Two Ways to Invest
Foreign investors can invest in two ways. Know which of the two ways foreign investors can invest.
Foreign Direct Investment
The foreign direct investment that is invested in the company of another country is called. This investment is a direct investment that is long term.
Foreign Portfolio Investment
When a foreign investor buys less than a 10% stake from an Indian company, it is called a foreign portfolio investment. It occurs for a short period.
Benefits of FDI
If there is foreign investment, then the FDI that comes into the country benefits the general public. Know about the benefits of this.
- The cost of production is greatly reduced by foreign investment.
- Under FDI, a foreign investor can open a new branch of an Indian company, which provides new employment opportunities.
- Through this, new technology also comes into the country, which plays an important role in developing the country.
- If foreign companies open new factories in the country, then competition will increase, and good and cheap products will be available to common people.
FDI Disadvantages
If FDI has its advantages, then it also has some disadvantages. Those who have been told you ahead know about the damage caused by it.
Its biggest disadvantage is that large companies will provide skilled people jobs, but unskilled people will not get jobs.
This will also hurt small companies. Big companies will become their customers to the public by selling cheaper goods, which small companies will not be able to compete with them, which will hurt small companies.
Foreign companies can take possession of the market by acquiring all the existing companies.
Also, Read – What is Digital India? Advantages and Disadvantages of Digital India
What is FII
FIIs are called foreign institutional investors. When a foreign institution invests in our country’s stock market, insurance, banking, etc., the investment made in this way is called FII, i.e., Foreign Institutional Investment. These are the investors who invest the capital of their country in any other country. The foreign institutional investor is a big investor; FIIs play a very important role in our country’s economy.
FII Full Form
Foreign Institutional Investor
Difference Between FII and FDI
- FDI is a direct investment in a country by a foreign company, while FII investors invest in shares, mutual funds. FIIs make participatory notes, government securities, commercial paper, etc., as an investment medium, but FDI is permanent, but FIIs sell out quickly when the market is in turmoil.
- Under FDIK, this process is controlled by foreign management, whereas FII does not require management control, as it is the secondary market’s hand.
- FIILong works on both long term and short term vision, while FDI works on long term vision.
- FIIs do not have a locking period, whereas FDI has a locking period.
- Investment in FII is less than 10 percent, while FDI investment is above 10 percent.
Before any FII or FDI invests in the Indian market, it must register itself with the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India and follow these rules.
Indian company where more than 50 percent FII participation
- Bata India – 78%
- Induration Technology – 66%
- Try Dent – 66%
- Coal India – 66%
- Granules India – 63%
- Vaibhav Global – 52%
- Usha Martin – 51%
Conclusion
In today’s post, you have learned the Difference Between FDI and FII and what is FDI, and along with it, you also know the benefits of FDI. We hope that the information given by us will be useful for you.
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