Thursday 18 November 2021

What is the difference between FDI and FPI?

 

Each Country needs money for its profitable widening also the funds can’t be elevated from just its domestic sources only. In this fast-developing world, The two main and well-needed kinds of foreign capital are Foreign Portfolio Investment (FPI) and Foreign Direct Investment (FDI).

FDI relates to the foreign investment where the investor gets a lasting interest in an enterprise in another country. It involves establishing a direct business interest in a foreign country, such as buying or establishing a manufacturing business, building warehouses, or buying buildings. Also, it tends to involve creating more of a substantial, long-term interest in the economy of a foreign country. FDI can also be made through different methods like creating a joint venture, through merger and acquisition, etc.
Foreign Portfolio Investments (FPI) refers to investing in the financial assets of a foreign country, such as stocks or bonds available on an exchange. It includes the buying of securities that can be easily bought or marketed. Hoping to generate a fast return the main motive of FPI is to invest money into a foreign country’s stock market.



DIFFERENCE BETWEEN FDI AND FPI
 
In the case of FDI, it is an Active Investment 
But in the case of FPI, it is a Passive Investment.
FDI- It is Direct Investment    
FPI- Indirect Investment
 FDI- Long Term Capital
 FPI-  Short Term Capital   
 FDI- Invests in financial and non-financial assets
 FPI-  Invests only in financial assets
 FDI-  Ownership  and managerial control
 FPI-  Only ownership
 FDI- Stable                                          
 FPI-  Volatile
 FDI- Entry & exit barriers exist
 FPI-  Entry & exit very easy

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