TYPES OF FOREIGN 
     INVESTMENT
                     FPI      FIIs
             Foreign 
            Investmen        Offshore 
              t              funds
                      FDI   ADRs/GDR
                              s
      FOREIGN DIRECT 
      INVESTMENT (FDI)
       FDI occurs when a firm invests directly in facilities to produce and/or market 
       a product in a foreign country.
       Foreign direct investment (FDI) is defined as an investment involving a long-
       term relationship and reflecting a lasting interest and control by a resident 
       entity in one economy (foreign direct investor or parent enterprise) in an 
       enterprise resident in an economy other than that of the foreign direct 
       investor (FDI enterprise or affiliate enterprise or foreign affiliate).
       It generally takes the form of acquiring a stake in an existing enterprise in 
       the foreign country or starting a subsidiary to expand the operations of an 
       existing enterprise. 
       FDI implies that the investor exerts a significant degree of influence on the 
       management of the enterprise resident in the other economy. 
      FOREIGN PORTFOLIO 
      INVESTMENT (FPI)
       FPI involves investment in foreign financial assets like stocks, bonds, 
       commodities etc. 
       This type of investment is not made with the intention of acquiring a 
       controlling interest in the issuing company. 
       Typically, this type of investment is short term in nature and is made to 
       take advantage of favorable changes in exchange rates or to earn short 
       term profits on interest rate differences.
       It provides the investor with an opportunity to diversify their portfolios and 
       better manage the associated risk.   
        
           DIFFERENCE BETWEEN FDI 
           AND FPI
           Basis                          FDI                           FPI
           Motive                         Made for the purpose of       Motivated by profit
                                          productive capacity
           Participation in               Intention of managerial       No say in the management
           management                     control
           Assets                         Physical                      Financial
           Duration                       Long-term                     Short-term
           Stability                      More stable                   Less stable (volatile)
           Impact on Growth               Critical driver of economic   Give impetus to financial 
                                          growth                        markets
           Entry and exit                 Difficult                     Easy
         CLASSIFICATION OF FDI
                                    By           By Nature 
                                Target/Asset    of Business 
                                -based view       Activity
                     By Direction                          By Motive
                                          Basis Of 
                                         Classificatio
                                             n