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Entire country is struck by the news being flashed about the FPI and FM Nirmala Sitharama’s no relief statement to FPI.  Before we understand why FM Nirmala Sitharman has exhibited stringency on FPI, we need to first understand what FPI is.

Apart from FPI there is another very popular terminology which has been very widespread in past couple of months i.e. FDI. FDI is Foreign Direct Investment and FPI stands form Foreign Portfolio investment.

FDI refers to capture the straight business opportunities in the foreign countries where in FPI majorly focuses on the investments in fiscal assets of any country.  Let’s understand the both with simple table of differentiation.

Capturing business opportunities like owning a business, start manufacturing, acquire infrastructure, people, buildings, etcFocuses on the fiscal assets and subsequent investments i.e. shares, debentures, stocks, bonds, etc
Has a long term focus on the investmentHas a short term or midterm focus on the investment
Due to the nature of longer & huge investment only the giants i.e. MNC, conglomerate or venture capitalists can only be a part of its ecosystemDue to nature of shorter / midterm moderate investment – smaller chunks of the society can also be a part of its ecosystem
It is very difficult to pull the investment out once it is doneIt is not very difficult to pull the investment out once it is done
It affects the country’s economy in long term and can be favourably a catalyst in the economic growth of the nation where the investment has been madeIt affects the country’s economy in midterm and short term; it is not every time favourable for the economic stability & growth of the nation where the investment is made

Currently FPI is not welcomed much by the finance ministry of India and FM Nirmala Sitharaman has declared the super rich tax on FPI. This heavy taxation may dodge the FPI to outgo but as of now the finance ministry is firm on having the super rich tax. In the next article we will see why this super rich tax policy has been applied; what will happen to Indian economy if this super rich tax on FPI would be confiscated.

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