Session on Foreign Direct Investment at SRMS IBS, Lucknow

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At Shri Ram Murti Smarak International Business School, (SRMS IBS) Lucknow students stay aware of latest developments affecting the business world through seminars, guest lectures, and conferences. These events contribute to knowledge development and dissemination in students, thus enhancing everyone’s value.

On 24 March, the topic for discussion was Foreign Direct Investment (FDI), where students performed a role play and explained the effects of FDI in Indian market as well as on China and USA. It was shown that while theoretical models imply that FDI is beneficial for a country’s development—a belief widely shared among policymakers—the empirical evidence does not support this view. This role play bridged the gap between theoretical and empirical literature with a model and calibration exercises that examine the role of local financial markets.The whole focus was on how FDI in 2015, 2016 and 2017 affected Indian market in retail, banking, defense, and e-commerce, besides other sectors. The role play emphasized how local policies and institutions may actually limit the potential benefits that FDI could provide to a host country. Key concepts discussed were:

  • Role play showed that an increase in FDI leads to higher growth rates in financially developed countries compared to rates observed in financially poor countries.
  • Local conditions, such as the development of financial markets and the educational level of a country, affect the impact of FDI on economic growth.
  • Policymakers should exercise caution when trying to attract FDI that is complementary to local production. The best connections are between final and intermediate industry sectors, not necessarily between domestic and foreign final goods producers
  • Human capital plays a critical role in achieving growth benefits from FDI.

The informative session proved invaluable for students in understanding the nuances of FDI.