1.

FIIs are considered a risky and unstable kind of foreign capital. Give reason.ORThe funds obtained through Fils take a flight in and out of the country easily.

Answer»

The investment made by foreign companies in financial institutions and bond/stock/share markets of another country is called Foreign Institutional Investor (FII).

  • The foreign companies interested in the home companies buy its shares or stocks or bonds. The home company thus receives the money via. the investment made by the foreign companies and hence this mode of obtaining money is very fast.
  • However, the darker side of this form of money is that if the foreign company feels that the Indian company in which it has invested is not doing well then it may any time withdraw its money from the market. It can do this by simply selling the share/stock/bond of that company that it has bought.
  • Hence, funds take a flight in and out of the country easily and thus this is considered to be a risky and unstable kind of foreign capital.


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