What are the distinctions between the different types of foreign investment into India and why are they so important?

Foreign investment into India takes one of two principal forms:

1. Foreign Direct Investment (FDI): The acquisition of shares or other securities in an Indian company.
2. Foreign Institutional Investment (FII): Investment by foreign institutional investors (such as hedge funds, insurance companies, or mutual funds) registered with the Securities and Exchange Board of India (SEBI).

These distinctions are important when interpreting recent changes in foreign investment policy, as foreign investment sectorial caps and approval routes often vary by both industry and investor.