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FOREIGN INVESTMENT | Company Vakil

FOREIGN INVESTMENT

Meaning

When any funding from outside India is used to make an investment in India it is called as Foreign Investment.

All investments made by Foreign Companies, Foreign Nationals, and even Non-Resident Indian in India come under the purview of Foreign Investment.

Foreign Investments can be made towards shares, properties, ownership/management or even collaborations.

Types of Foreign Investments

Foreign Investments are divided into three different types based upon the area in which they are invested, they are as follows:

  1. Foreign Direct Investment (FDI)
  2. Foreign Portfolio Investment (FPI)
  3. Foreign Institutional Investment (FII)

 

1. Foreign Direct Investment (FDI)

Foreign Direct Investment (FDI) refers to a foreign investment made by a company or individual who is a controlling ownership entity in one country with business relations and interests in another country.

FDI is created by establishing or investing in business operations or by venturing into joint ventures by mergers and acquisitions or building new facilities etc.

 

2. Foreign Portfolio Investment (FPI)

Foreign Portfolio Investment (FPI) refers to a foreign investment by foreign entities and non-resident Indians in Indian investments such as securities, shares, government bonds, corporate bonds, convertible securities, infrastructure securities etc.

FPI ensures a regulatory interest in India at an investment that is lesser than FDI, with easier opportunity for the purpose of entry and exit into the investment.

 

3. Foreign Institutional Investment (FII)

Foreign Institutional Investment (FII) refers to a foreign investment by foreign entities and non-resident Indians in Indian investments such as securities, real estate and other investment assets.

The investors in FII include mutual fund companies, hedge fund companies etc.

FII ensures a regulatory interest in India, with easier opportunity to diversify portfolio ensuring hedging and high return gain with easier opportunity for the purpose of entry and exit into the investment.

As can be easily seen, Foreign Portfolio Investment (FPI) and Foreign Institutional Investment (FII) are very much similar in their mechanism of working and investing. However, the key difference between both lies in the type of investors which form part of them.

However, though they are very similar and very often the terms FPI and FII are used interchangeably; there exist a key difference in their type of investors which can be seen when both are compared minutely.

 

SUMMARY

Foreign Investment refers to investments made in India by foreign investors, companies and even non-resident Indians. Foreign investments are generally made in stocks, properties, businesses ventures etc. They help in boosting the country’s economy.

For more information regarding this or any other visit Company Vakil website

 

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