Assertion: Foreign Institutional investment is thought to be more useful to a country than investments in the equity of its companies.

Reasoning: Equity investments are potentially ‘hot money’ which can leave at the first sign of trouble.

Assertion (A) is not true but Reasoning (R) is correct.

Foreign Direct Investment : Investment of foreign assets into domestic structures, equipment and organisations. It does not include foreign investment into the stock markets. Foreign direct investment is thought to be more useful to a country than investments in the equity of its companies because equity investments are potentially ‘hot money’ which can leave at the first sign of trouble, whereas FDI is durable and generally useful whether things go well or badly.

Foreign Institutional Investment : Foreign investments which come in the form of stocks, bonds, or other financial assets. This form of investment does not entail active management or control over the firms or investors.