Why in News?
FDI inflows into India hit a 50-month high of $11.11 billion in July 2025, driven by manufacturing and services sectors. Singapore led investments, while net FDI rose sharply, signaling renewed investor confidence ahead of S&P’s rating upgrade and economic reforms.
Description:
| Feature | Foreign Direct Investment (FDI) | Foreign Portfolio Investment (FPI) |
| Definition | Investment by a foreign entity (individual/company/government) in the productive assets (factories, infrastructure, companies) of another country with management control/long-term interest. | Investment by foreign investors in financial assets (stocks, bonds, mutual funds, money market instruments) of another country without management control. |
| Control & Ownership | Investors get significant control over management/decision-making (≥10% equity as per IMF/OECD norm). | No control over management; purely financial stake (<10% equity). |
| Examples | – Foreign company setting up a plant in India |
| Feature | Foreign Direct Investment(FDI) | Foreign Portfolio Investment(FPI) |
| Nature of Investment | Physical assets (factories, offices) | Financial assets (stocks, bonds) |
| Control | Involves management/control | No management involvement |
| Duration | Long-term | Short-term/speculative |
| Exit Difficulty | Difficult | Easy and liquid |
| Economic Impact | Boosts jobs, tech | Adds market liquidity |
| Market Type | Primary market | Secondary market |
FIIs vs FPIs:
- FIIs (Foreign Institutional Investors) are a subset of FPIs.
- FIIs include mutual funds, pension funds, insurance companies, hedge funds, etc.
- All FIIs are FPIs, but not all FPIs are FIIs.
La Excellence IAS Academy, the best IAS coaching in Hyderabad, known for delivering quality content and conceptual clarity for UPSC 2025 preparation.
FOLLOW US ON:
◉ YouTube : https://www.youtube.com/@CivilsPrepTeam
◉ Facebook: https://www.facebook.com/LaExcellenceIAS
◉ Instagram: https://www.instagram.com/laexcellenceiasacademy/
GET IN TOUCH:
Contact us at info@laex.in, https://laex.in/contact-us/
or Call us @ +91 9052 29 2929, +91 9052 99 2929, +91 9154 24 2140
OUR BRANCHES:
Head Office: H No: 1-10-225A, Beside AEVA Fertility Center, Ashok Nagar Extension, VV Giri Nagar, Ashok Nagar, Hyderabad, 500020
Madhapur: Flat no: 301, survey no 58-60, Guttala begumpet Madhapur metro pillar: 1524, Rangareddy Hyderabad, Telangana 500081
Bangalore: Plot No: 99, 2nd floor, 80 Feet Road, Beside Poorvika Mobiles, Chandra Layout, Attiguppe, Near Vijaya Nagara, Bengaluru, 560040
