FDI and FII

FDI - Foreign Direct Investment

FII - Foreign Institutional Investor 


Whenever I ask any one about FDI and FII most of the people give me only one answer : FDI means Foreign direct investment and FII means Foreign institutional investor. Then I have to ask will you please elaborate then few accept reality that they do not know, others try to fool me and few says - " ab coaching institute khol lein kya tumhare liye ".... hehehehe..but I simple love that expression..I received few mails regarding this issue. So here I am..

Yes the full form of the above abbreviations are correct but we need to know a little more.. You know friends most of the human beings are greedy for money, not all the human beings. They want to earn more and more and moreeeeeeeeeee..and this never ends , they want to maximise their profit...I give an example of chirkut mohan (C).. a business man ..having a conversation with his friend (F)

C - Yaar F , I want to earn more. I am a business man. I installed my industries on various parts of India and I am making good profit..but " ye dil maange more "...give me some ideas..

F - Why do not you invest in foreign countries?? like you have installed your industries in India apply the same concept in foreign countries ..

C - How can i do that???

F - You can invest in foreign country through FDI and FII..

C - oohhhhhhhhhhhh FDI.... ok ok..but what is this FDI?

F - It means you can directly invest in foreign countries. you can install your business firm in other countries but you have to follow the rules and procedure established by that country( RBI ,CCEA, Foreign Investment promotion board for India). Countries target specific sector which are required on their country , for example you do business of iron and steel and if you come to know that any specific country has huge amount of iron -ore , the labour is also cheep and they need some industries who can extract iron-ore from mines and set-up plant for making iron and steel. Will you do it??

C - Definitely , I will make huge profit but why don't the country set-up their own industries ? Why they want any foreign country to invest?

F - because it will bring foreign capital into that country , technology transfer also play major role. Your industry will provide employment opportunities to their citizens. 

C-  but what about partnership of my company? does government will not interfere?

F - That depends upon countries to countries , for example India has allowed 49% of FDI in the insurance sector. It means a foreign company can invest up to 49% in insurance and rest have to do by any Indian firm/Government. Government generally further liberalize FDI % to gain more foreign capital. Generally foreign capital comes in US dollar.( CHECK RECENT FDI% FOR VARIOUS SECTOR)

C - ohhhh that is the reason government liberalized FDI in many sectors including  Raja sector..

F - Raja sector?????????

C -- Aree Telecom sector...both is same.. and what is this FII?

F - FII is an investment made by an investor in the market( stock exchange) of foreign nation. your company only needs to get registered with stock exchange of foreign nation. Now you can invest in stock market and can earn profit.

C - Then it's better then FDI na..Why would I set-up my whole business in foreign country?

F - No Chirkut , Government generally do not allow any individual to invest in their stock market. 

C - why?

F - Because whenever you want you can purchase/ sale shares and this make markets conditions high volatile. That is the reason government only allows REPUTED INSTITUTION TO INVEST IN THEIR STOCK MARKET WHO HAVE VERY GOOD TRACK RECORDS  and in addition they have to follow various rules and regulation of market regulator in our case SEBI ( Security and Exchange board of India) whose current chairperson is U.K. SINHA , is the market regulator.
                                                    Every country prefer FDI over FII because FDI brings a lot of things and in addition it's not easy to wind up your business in any country and move on but in FII markets became very unstable if investors start taking money out from our stock market and start investing in any other countries stock market. This all can happen in few minutes. That is the reason we only want repudiated , renowned institutions and SEBI check Institution investors history before permitting them..
FII players pull out their money from stock-market even for slightest good/bad rumours and invest in different country.That’s why it’s called ‘Hot money‘ -was responsible for 1997 Asian financial crisis.

C-  Aa gaya Bhai samjh mein( Got it)..

F - Chirkut this is only basics ..OK go through the current news papers and RBI websites then you will come to know recent updates.. 

C - Yo Baby....

" Friends, daily we are listening about weak market conditions specially stock market.. These is only basic concept.. Read few magazines and news paper's then you will get the recent updates"

JAI HIND...

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