Foreign investment is defined as any investment that is made in India by funding sources from outside of India. All the investments made by foreign corporatesforeign nationals and non residential Indian comes under the category of foreign investments.
TYPES OF FOREIGN INVESTMENTS
All the funds coming from foreign countries can be invested in the form of shares, properties ownership, management or collaboration.
Foreign investments can be classified as
- Foreign portfolio investment(FPI)
- Foreign direct investment (FDI)
- Foreign institutional investment(FII)
Foreign direct investment (FDI)
FDI is when a company or individual with an entity in one country make an investment in form of controlling ownership in terms of business in another country. Establishment of business operations or entering into joint ventures by mergers or acquisitions r building new facilities can come under FDI.
Foreign portfolio investments (FPI)
When a foreign entities or a non resident make an investment in Indian securities such as government bonds, shares, corporate bonds l, convertible securities l, infrastructure securities etc, it is called FPI. FPI type of investment is lower than FDI and ensures a controlling interest in India with flexibility for entry and exit.
Foreign institutional investments (FII)
When foreign entities invest in securities, real property and other investment assets it is know as FII. Investors in FII type of investment includes hedge fund companies, mutual fund companies etc. The motive of FII aid not to take controlling interest but to ensure hedging by diverse portfolio and to get high returns with quick entry and exit.
The only difference between FII and FPI is in the type of investors involved and hence these two terms are used correspondingly.
For more such articles visit Company Vakil