Foreign Institutional Investors (FIIs) are entities established outside a country that invest in that country’s financial markets. They include hedge funds, insurance companies, pension funds, mutual funds, and investment banks. FIIs play a crucial role in emerging economies like India by bringing in capital, which can boost economic growth and development. They typically invest in equity markets, debt markets, and sometimes in unlisted companies. The Securities and Exchange Board of India (SEBI) regulates FIIs to ensure transparency, reduce market volatility, and protect domestic investors. FIIs contribute to market efficiency by enhancing liquidity and encouraging corporate governance. However, their influence can also lead to market volatility, as their investment decisions are often influenced by global market trends and conditions. Understanding FIIs is essential for UPSC aspirants as it ties into broader economic policies, international finance, and the impact of globalization on the Indian economy. Their operations, benefits, and regulatory framework are key areas within the economic segment of the UPSC syllabus.
Introduction Significant highs and lows have marked India's economic journey over the last decade. The country experienced robust GDP growth…