FDI and FII meaning and differences

     Meaning

FII(Foreign Institutional Investors)= when foreign-players invest in shares and stockmarket.

FDI(Foreign Direct Investment)= when foreign companies invest in India for manufacturing, production, sales etc. by themselves (100%) or by partnering with some Indian firms

What’s the difference? Which one is better?
Ans: FII players pull out their money from stock-market even for slightest good/bad rumors and invest in in different country.

That’s why it’s called ‘Hot money‘ -was responsible for 1997 Asian financial crisis

In 2007 SEBI made some regulation in FII investment via participatory notes to control the hot-money.

Also, there were allegations that Pakistan might use it for ‘financial-terrorism’ using FII via Participatory notes.

Although there are tools such as Tobin Tax, to control the flight of hot-money. But still, For development, Governments want and prefer FDI and not FII. Because It’s hard to pull out FDI once invested.