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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Q: 28 (IAS/2011)
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 ?

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,163,109,43,163,28,38

keywords: 

{'foreign direct investment': [0, 0, 2, 7], 'foreign institutional investor': [0, 0, 0, 1], 'fdi': [0, 0, 3, 7], 'fii': [0, 0, 0, 1], 'investment': [0, 0, 0, 1], 'primary market': [0, 0, 0, 2], 'secondary market': [0, 0, 0, 1], 'capital availability': [0, 0, 0, 1], 'specific sectors': [0, 0, 0, 1], 'capital': [31, 3, 12, 18]}

The statement "FII helps in increasing capital availability in general, while FDI only targets specific sectors" best represents an important difference between Foreign Direct Investment (FDI) and Foreign Institutional Investor (FII).

Foreign Direct Investment (FDI) refers to an investment made by a foreign company in the economy of another country, typically involving the acquisition of a controlling stake in a local company or the establishment of a new business operation. FDI is often directed towards specific sectors or industries, such as manufacturing or infrastructure, and is generally intended to contribute to the long-term development of the local economy.

Foreign Institutional Investor (FII), on the other hand, refers to an investor or investment fund based outside of the country, which invests in the financial markets of the host country. FII investments are typically made in the form of portfolio investments, such as stocks and bonds, and are more focused on generating short-term gains.

Therefore, while FDI is typically directed towards specific sectors or industries and is intended to contribute to the long-term development of the local economy, FII is more focused on increasing capital availability in general, and is more likely to be directed towards short-term gains.