Both Foreign Direct Investment (FDI) and Foreign Institutional Investor (FII) are related to investment in a country. Which one of the following statements best represents an important difference between the two?

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CollectorBabu · Accepted Answer

Correct Answer: FII helps in increasing capital availability in general, while FDI only targets specific sectors.. Foreign Direct Investment is investment which a parent company makes in foreign country while Foreign Institutional Investor is an investment made by investor in markets of foreign nation. Foreign Institutional Investor have liberty to sell and take money back, while Foreign Direct Investment will not. Foreign Institutional Investor can enter stock market easily while Foreign Direct Investment cannot enter and exit in stock market easily. It is noted that Foreign Direct Investment targets for particular enterprise for increasing enterprises capacity or productivity while Foreign Direct Investment translates capital inflow into extra production. Option A is incorrect as it changes the roles of FII with FDI. Option C is also incorrect as while FDI flows in primary market while FII flows in secondary market. Option D is incorrect as FDI is not considered as stable in comparison with FII, so only option B is correct since FII increases capital availability while FDI targets particular sectors.

Both Foreign Direct Investment (FDI) and Foreign Institutional Investor (FII) are related to investment in a country. Which one of the following statements best represents an important difference between the two?

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