The Full Form of FPI is Foreign Portfolio Investment. It is an investment made by foreign individuals or institutions in financial assets such as stocks, bonds, and other securities of a country. Furthermore, unlike Foreign Direct Investment (FDI), in which they obtain a significant degree of control or ownership in a company, FPI revolves around passive investments without any active management or control.
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What is the Usage of FPI?
In addition, FPI is used for the following reasons:
- FPI has an important part in channelling capital from foreign investors into the domestic financial markets of a country.
- Additionally, FPI gives a route for investors to diversify their portfolios internationally. Hence they are aiming for higher returns or evading risks in their home markets.
- Moreover, FPI contributes to the liquidity and efficiency of financial markets. They do so by increasing trading activity.
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What is the Role of FPI in India?
In India, FPI increases domestic investment and finances economic growth.
- Moreover, the Indian government promotes FPI inflows through different policy measures and reforms that are aimed at attracting foreign investors.
- Additionally, FPI also helps in stabilising the Indian rupee exchange rate by providing a steady flow of foreign currency into the country.
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What are the Examples of FPI in India?
Additionally, the Examples of FPI in India are as follows:
- Foreign institutional investors (FIIs)
- Foreign portfolio investors (FPIs)
- Hedge funds
- Pension funds
- Sovereign wealth funds
- Global investment funds
Also Read: What is the Full Form of ETF?
What are the Advantages of FPI?
Furthermore, the Advantages of FPI are:
- Increased capital inflows
- Enhanced liquidity in financial markets
- Access to global investment expertise
- Technology transfer
- Economic development
- Market efficiency
- Boosts risk-sharing
- Encourages integration with global financial markets
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