FDI, FPI and balance of payments

Foreign direct investment (FDI) is a lasting investment in a business abroad — building a plant or buying a controlling stake — while foreign portfolio investment (FPI) is buying shares or bonds without seeking control. The difference is control and staying power: FDI is hard to reverse, FPI can leave quickly. Worked example: a foreign company building a factory is FDI; a foreign fund buying listed shares for a few months is FPI, and its sudden exit can shake the stock market and the currency.