Key Differences Between FDI and FPI

The difference between FDI and FPI can be drawn clearly on the
following grounds:

1. The investment made by the international investors to obtain a

substantial interest in the enterprise located in a different
country is a Foreign Direct Investment or FDI. The investment
made in passive holdings like stocks, bonds, etc. of the
enterprise of a foreign country by overseas investors is known
as a Foreign Portfolio Investment (FPI).
2. FDI investors play an active role in the management of the
investee company whereas FPI investors play a passive role, in
the foreign company.
3. As the FDI investors gain both ownership and management
right through investment, the level of control is relatively high.
Conversely, in FPI the degree of control is less as the investors
obtain only ownership right.
4. FDI investors have a substantial and long-term interest in the
firm which is not in the case of FPI.
5. FDI projects are managed with great efficiency. On the other
hand, FPI projects are less efficiently managed.
6. FDI investors invest in financial and non-financial assets like
resources, technical know-how along with securities. As
opposed to FPI, where investors invest in financial assets only.
7. It is not easy for FDI investors to sell out the stake acquired.
Unlike FPI, where the investment is made in financial assets
which are liquid, they can be easily sold.