FDI Vs FII: Which Foreign Investment is better for India?

In FII, only the company registration is needed in the stock exchange in order to make investments but FDI has very different criteria to be fulfilled to make an FDI investment. People also say the hot burning money to foreign Institutional Investment because the FII investor has liberty to withdraw to sell at any time, but same thing is not possible in Foreign Direct Investment (FDI). In a simpler word, we can say that, it is very easy to enter the stock market through Foreign Institutional Investment where as, things are not easier in Foreign Direct Investment. FDI is highly preferred to the FII as they are considered to be the most beneficial kind of foreign investment for the whole economy of the nation. This is the actual reason for which nations choose FDI’s more than FIIs.

Foreign Direct Investment targets on specific enterprise. They mainly focus toward the growth and development of the enterprise efficiency and change in administration control. In an FDI, the funds inflow is converted into additional manufacture. The FII investment flows only into the resulting market. It helps in increasing capital availability in general rather than enhancing the capital of a defined enterprise.

The Foreign Direct Investment is considered to be steadier than Foreign Institutional Investor. FDI not only increase capital growth but also helps in superior authority practices and better management skills and even technology relocation. Although, the Foreign Institutional Investor helps in promoting good authority and improving better accountability, it does not come out with any other benefits of the FDI.

The FDI flows into the primary market, the FII flows into secondary market. While FIIs are short-term investments, the FDI’s are long term.

On Conclusion, Foreign Direct Investment (FDI) flows into a company's assets, fuels production, employment, taxes and growth, etc. Where as Foreign Institutional Investment (FII) flows into the secondary market, that is, stock exchanges. While both are important, FDI has a special importance for a developing country such as India. The FIIs, has added depth and substance stock market.