In the context of Indian Economy, consider the following

Solution

Foreign portfolio investment (FPI) consists of securities and other financial assets passively held by foreign investors. It does not provide the investor with direct ownership of financial assets and is relatively liquid depending on the volatility of the market. FPI is part of a country’s capital account and is shown on its Balance of Payments (BOP). FPI is often referred to as “hot money” because of its tendency to flee at the first signs of trouble in an economy. FPI is more liquid and riskier than Foreign Direct Investment (FDI).