Difference between FPI and FDI
Foreign Portfolio Investment (FPI) |
Foreign Direct Investment (FDI) |
| It’s a direct investment and involves active investors | It’s an indirect investment and involves passive investor |
| This kind of investment is made in countries with the potential to grow and has a skilled workforce. | This kind of investment is made in foreign markets in pursuit high of returns. |
| It’s considered a long-term investment. | It’s considered a short-term investment. |
| It provides ownership of the company’s assets and decision-making power in the management. | It doesn’t provide any kind of ownership in the company’s asset and also doesn’t provides any role in the management. |
| Investment is being made in the physical assets and the stake of the foreign company. | Investment is being made in bonds, securities, or funds of the foreign company. |
| This kind of investment is stable and has lesser chances of loss. | This kind of investment is quite volatile and has higher chances of losses. |
Foreign Portfolio Investment
Investment is quite necessary for any economy to grow, and that investment can either be domestic or foreign investment. Foreign investment provides a boost to the economy as it brings in foreign currency and also results in the strengthening of the local currency. Foreign investment can be referred to as an investment done by an individual, organization, or by nation in another country. Foreign Portfolio Investment (FPI) and Foreign Direct Investment (FDI) are the two most common ways via which foreign investment is being made. Also, the increase in FPI and FDI can have positive effects on the growth of the economy.
As per the report published in the Union Budget of India, in the financial year, 2021-22 Sensex observed a hike of 11.36% due to an increase in Foreign Portfolio Investment (FPI) in India.