FDI Vs FII

It is most important to understand distinction between these two. When FDI comes in the country then it is essentially in the form of long term investment which will not only bring funds but create job opportunity too. Whereas when FII brings fund in the country, it is essentially for short term and primarily invested in capital markets but will not lead to any other economic activity like job creation, etc. It is clear from this as to which mode of fund flow is intended and why. However, some believe capital markets are indications of how good or well the development is happening in the country.

Fluctuation in Rupee due investment in Dollar (FII or FDI)

It is seen that for every dollar invested, the equivalent amount of rupee (either Rs. 45 or Rs. 40) is pumped in the system. As a result of this, increase in fund flow in India results in rupee appreciation. This appreciation in rupee can be curtailed by RBI by using a method called as MSS (Market Stabilization Scheme) which helps in sucking-up excess liquidity from the system.

Next

Prof. Suyash Bhatt is B.Tech. (Computers) and Master's in Management Studies from Mumbai University with specialization in Finance. He is also NCFM Certified Trainer. Currently, he is working as Faculty for Finance at K. J. Somaiya Institute of Management Studies, Mumbai.