The impact of MNC on Indian Economy.

ACKNOWLEDGEMENT

I hereby express my heartiest thanks to all sources who have contributed to the making of this project. I oblige thanks to all those who have supported, provided their valuable guidance and helped for the accomplishment of this project. I also extent my hearty thanks to my family, friends, our co-ordinator college teachers and all the well wishers. I also would like to thanks my project guide for his guidance and timely suggestion and the information provided by his on this particular topic. It is matter of outmost pleasure to express my indebt and deep sense of gratitude to various person who extended their maximum help to supply the necessary information for the present thesis, which became available on account of the most selfless cooperation. Above all its sincere thanks to the UNIVERSITY OF MUMBAI for which this project is given consideration and was done with outmost seriousness

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The impact of MNC on Indian Economy.

OBJECTIVE OF THE STUDY

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The impact of MNC on Indian Economy.

The role of MNC on Ind ! ON INDIAN ECONOMY

ABSTRACT

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The impact of MNC on Indian Economy.

,he purpose of these projects is to understand the impact Indian #ulti-nationals have in development of Indian as a whole. -ince 1221 till present, there were various policies framed, amendment, ordinance passed by %3I to encourage its domestic industries to go global. ,herefore central governing council of Indian financial institute, ,he %3I, in #arch 0441, significantly liberali5ed the policies for Indian investment abroad. *nabling Indian players to globalised their operation, which in turn had a considerable impact on India and its foreign market. -o through this project we would put light on those aspects which in turned has helped and favored Indian companies to go global and impact of this policies and measures on Indian foreign market.

TABLE OF CONTENTS
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The impact of MNC on Indian Economy.

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"# INTRODUCTION
!# H $%or& '
,here is a dispute as to which was the first #.(. -ome have argued that the "nights ,emplar, founded in 111<. =owever, others claim that the /utch *ast India (ompany was the first proper multinational.

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The impact of MNC on Indian Economy.

#ultinational corporations are business entities that operate in more than one country. ,he typical multinational corporation or #.( normally functions with a head?uarters that is based in one country, while other facilities are based in locations in other countries. In some circles, a multinational corporation is referred to as multinational enterprise @#3*A or a transnational corporation @,.(A. ,he exact model for an #.( may vary slightly. )ne common model is for the multinational corporation is the positioning of the executive head?uarters in one nation, while production facilities are located in one or more other countries. ,his model often allows the company to take advantage of benefits of incorporating in a given locality, while also being able to produce goods and services in areas where the cost of production is lower. ,ill 1221, India was more or less a closed *conomy. ,he rate of growth of the economy was limited. ,he contribution of the local industries to the countryBs $/! was limited that were the main cause of shortage of funds for various development projects initiated by the government. In an effort to revive the industries and to bring the country back on the right track, the government began to open various sectors such as Infrastructure, Automobile, ,ourism, Information ,echnology, +ood and 3everages, etc to the #ultinational (orporations. ,he #.(s slowly but reluctantly began to pour capital investment, technology and other valuable resources in the country causing a surge in $/! and upliftment of the economy as a hole. ,his was the post 1221 era where the government began to invite and welcome giant #.(s into the country.

(# The )ro*%h of Ind !n MNC+$ hel, -o.n%r& n follo* n) *!&$' /

1A #.(Bs help to increases the investment level C thereby the income C employment in host country. 0A ,he transnational corporations have become vehicles for the transfer technology, especially to developing countries.

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The impact of MNC on Indian Economy.

1A ,hey also kind a managerial revolution in host countries through professional management and employment of highly sophisticated management techni?ues. 6A ,he #.(s enable that host countries to increases their exports C decreases their import re?uirements. :A ,hey work to e?uali5e cost of factors of production around the world. ;A #.(Bs provide and efficient means of integrating national economies. <A ,he enormous resources of multinational enterprises enable them to have very efficient research C development systems. ,hus, they make a commendable contribution to inventions C innovations. >A #.(Bs also stimulate domestic enterprise because to support their own operations, the #.(Bs may encourage C assist domestic suppliers. 2A #.(Bs help to increase competition C break domestic monopolies.

0# MULTINATIONAL COR1ORATION 2 MNC3'

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The impact of MNC on Indian Economy.

!# In%ern!% on!l ,o*er

'arge multinational corporations can have a powerful influence in international relations, given their large economic influence in politiciansD representative districts, as well as their extensive financial resources available for public relations and political lobbying. ,ax (ompetition #ultinationals have played an important role in globali5ation. (ountries and sometimes subnational regions must compete against one another for the establishment of #.( facilities, and the subse?uent tax revenue, employment, and economic activity. ,o compete, countries and regional political districts offer incentives to #.(s such as tax breaks, pledges of governmental assistance or improved infrastructure, or lax environmental and labour standards. 'obbying E #ultinational corporate lobbying is directed at a range of business concerns, from tariff structures to environmental regulations. ,here is no unified multinational perspective on any of these issues. (ompanies that have invested heavily in pollution control mechanisms may lobby for very tough environmental standards in an effort to force non-compliant competitors into a weaker position. +or every tariff category that one multinational wants to have reduced, there is another multinational that wants the tariff raised. *ven within the 7.-. auto industry, the fraction of a companyDs imported components will vary, so some firms favor tighter import restrictions, while others favor looser ones.

(# Go4ern5en% 1o*er '

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The impact of MNC on Indian Economy.

In addition to efforts by multinational corporations to affect governments, there is much government action intended to affect corporate behavior. ,he threat of nationali5ation @forcing a company to sell its local assets to the government or to other local nationalsA or changes in local business laws and regulations can limit a multinationalDs power. #icro-#ultinationals *nabled by Internet based communication tools, a new breed of multinational companies is growing in numbers. ,hese multinationals start operating in different countries from the very early stages. ,hese companies are being called micromultinationals.&hat differentiates micro-multinationals from the large #.(s is the fact that they are small businesses. -ome of these micro-multinationals, particularly software development companies, have been hiring employees in multiple countries from the beginning of the Internet era. 3ut more and more micro-multinationals are actively starting to market their products and services in various countries. Internet tools like $oogle, 9ahoo, #-., *bay and Ama5on make it easier for the micromultinationals to reach potential customers in other countries.(ontrary to the traditional powerful image of the large #.(s, the micro-multinationals face the limitations and the typical challenges of a small business. In most cases, the micro-multinational companies are being run by technically savvy people who can use various Internet tools to overcome the challenges of remote collaboration, customer service and sales infrastructures.

-# M.l% n!% on!l$ fro5 E5er) n) M!r6e%$

'arge number of multinationals are operating into emerging markets and at the same time a number of multinationals are coming from emerging markets. !rofessor %ajesh " !illania is bringing out a special issue on #ultinationals from *merging #arkets in 044>.

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The impact of MNC on Indian Economy.

7# M.l% n!% on!l Co5,!n e$ n Ind !

,he post financial liberation era in India has experienced huge influx of D#ultinational (ompanies in IndiaD and propelled IndiaDs economy to greater heights. Although, majority of these companies are of American origin but it did not take too long for other nations to reali5e the huge potential that India offers. D#ultinational (ompanies in IndiaD represent a diversified portfolio of companies representing different nations. It is well documented that American companies accounts for around 1<F of the turnover of the top 04 firms operating in India. 3ut, the scenario for D#.( in IndiaD has changed a lot in recent years, since more and more firms from *uropean 7nion like 3ritain, Italy, +rance, $ermany, .etherlands, +inland, 3elgium etc have outsourced their work to India. +innish mobile handset manufacturing giant .okia has the second largest base in India. 3ritish !etroleum and Godafone @to start operation soonA represents the 3ritish. A host of automobile companies like +iat, +ord #otors, !iaggio etc from Italy have opened shop in India with %C/ wing attached. +rench =eavy *ngineering major Alstom and !harma major -anofi Aventis is one of the earliest entrant in the scene and is expanding very fast. )il companies, Infrastructure builders from #iddle *ast are also flocking in India to catch the boom. -outh "orean electronics giants -amsung and '$ *lectronics and small and mid-segment car major =yundai #otors are doing excellent business and using India as a hub for global delivery. Hapan is also not far behind with host of electronics and automobiles shops. (ompanies like -ingtel of -ingapore and #alaysian giant -alem $roup are showing huge interest for investment. In spite of the huge growth India Inc have some bottlenecks, like

Irrational policies @tax structure and trade barriersA. 'ow invest in infrastructure - physical and information technology. -low reforms @political reforms to improve stability, privati5ation and

deregulation, labor reformsA.

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The impact of MNC on Indian Economy.

%eports says, performance of 1 out of every 6 D#ultinational (ompaniesD has met or exceeded internal targets and expectations. India is perceived to be at par with (hina in terms of +/I attractiveness by D#ultinational (ompanies in IndiaD. In view of D#ultinational (ompaniesD community, it ranks higher than (hina, #alaysia, ,hailand, and !hilippines in terms of #.( performance. #ultinational (ompanies )perating in India cite IndiaDs highly educated workforce, management talent, rule of law, transparency, cultural affinity, and regulatory environment as more favorable than others. #oreover, they acknowledged, IndiaDs leadership in I,, business processing, and %C/ investments. D#ultinational (ompanies in IndiaD are bullish on

IndiaDs market potential. 'abor competitiveness. #acro-economic stability. +/I attractiveness.

!# Wh!% !re !d4!n%!)e$ !nd d $!d4!n%!)e$ of MNC$8

For ! ,er$on nd 4 d.!l Ad4!n%!)e' #.(s are globally recogni5ed businesses so you have great potential for your (areer growth in a $lobal level D $!d4!n%!)e' (areer path in #.( will take time to establish.

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The impact of MNC on Indian Economy.

(# For So- e%&

Ad4!n%!)e' #.(s remove established legacy businesses and promote local employment opportunities. ,hey also provide various charitable services to the society. D $!d4!n%!)e' #.(s induces competition, and their profit minded operations may impact local marketIproduce.

-# For Go4ern5en%
Ad4!n%!)e' ,ax -ource *conomic 3enefit D $!d4!n%!)e' #.(s -trategy will influence various government policies making which may not always be good for the economy

#.(sJ *ven Indian companies should not allow. =ave you ever given a second thought to what will happen to small retail shop owners C farmersJ ,hese big retailers would control the prices of commodities, farm produce etc. once they establish their presence.

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The impact of MNC on Indian Economy.

d# M!9or %& of MNC:$ n Ind ! 5!6 n) ,rof %$'

A majority of foreign companies operating in India are making profits but the multinationals felt the need to build brand India so as to attract more investors, a study by +I((I has said. According to +I((IDs annual +/I survey, <4 per cent of the foreign companies here are earning profits from their Indian operations. ,he survey said >6 per cent of the respondents gave a positive assessment of India, although they highlighted the need for building brand India and showcase IndiaDs potential as an investment destination. /espite an overwhelming majority, 21 per cent, were upbeat about the market conditions and the potential for further +/I inflows, they expressed concerns about the ?uality of infrastructure in India, it said.

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The impact of MNC on Indian Economy.

;# E-ono5& of Ind !'

,he economy of India, when measured in 7-/ exchange-rate terms, is the twelfth largest in the world. It is the third largest in terms of purchasing power parity. India is the second fastest growing major economy in the world. =owever, IndiaDs huge population results in a per capita income of K6,:60 at !!! and K1,4>2 at nominal. ,he &orld 3ank classifies India as a low-income economy. IndiaDs economy is diverse, encompassing agriculture, handicrafts, textile, manufacturing. Although two-thirds of the Indian workforce still earn their livelihood directly or indirectly through agriculture, services are a growing sector and play an increasingly important role of IndiaDs economy. ,he advent of the digital age, and the large number of young and educated populace fluent in *nglish, is gradually transforming India as an important Dback officeD destination for global outsourcing of customer services and technical support. -ectors like manufacturing, pharmaceuticals, biotechnology, nanotechnology, telecommunication, shipbuilding, aviation and tourism are showing strong potentials with higher growth rates. India followed a socialist-inspired approach for most of its independent history, with strict government control over private sector participation, foreign trade, and foreign direct investment. =owever, since the early 1224s, India has gradually opened up its markets through economic reforms by reducing government controls on foreign trade and investment. ,he privatisation of publicly owned industries and the opening up of certain sectors to private and foreign interests has proceeded slowly amid political debate. India faces a fast growing population and the challenge of reducing economic and social ine?uality. !overty remains a serious problem, although it has declined significantly since independence.

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The impact of MNC on Indian Economy.

!# 1re/-olon !l'
,he citi5ens of the Indus Galley civilisation, a permanent and predominantly urban settlement that flourished between 0>44 3( and 1>44 3(, practised agriculture, domesticated animals, used uniform weights and measures, made tools and weapons, and traded with other cities. *vidence of well planned streets, a drainage system and water supply reveals their knowledge of urban planning, which included the worldDs first urban sanitation systems and the existence of a form of municipal government. %eligion, especially =induism, and the caste and the joint family systems, played an influential role in shaping economic activities. L14M ,he caste system functioned much like medieval *uropean guilds, ensuring the division of labour, providing for the training of apprentices and, in some cases, allowing manufacturers to achieve narrow speciali5ation.+or instance, in certain regions, producing each variety of cloth was the speciality of a particular sub-caste. *stimates of the per capita income of India @1>:<N1244A as per 126>N62 prices. ,extiles such as muslin, (alicos, shawls, and agricultural products such as pepper, cinnamon, opium and indigo were exported to *urope, the #iddle *ast and -outh *ast Asia in return for gold and silver. Assessment of IndiaDs pre-colonial economy is mostly ?ualitative, owing to the lack of ?uantitative information. )ne estimate puts the revenue of AkbarDs #ughal *mpire in 1;44 at O1<.: million, in contrast with the total revenue of $reat 3ritain in 1>44, which totalled O1; million. India, by the time of the arrival of the 3ritish, was a largely traditional agrarian economy with a dominant subsistence sector dependent on primitive technology. It existed alongside a competitively developed network of commerce, manufacturing and credit. After the fall of the #ughals, India was administered by #aratha *mpire. ,he maratha empireDs budget in 1<64s, at its peak, was %s. 144 million#

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The impact of MNC on Indian Economy.

(# Colon !l'
(olonial rule brought a major change in the taxation environment from revenue taxes to property taxes resulting in mass impoverishment and destitution of the great majority of farmers. It also created an institutional environment that, on paper, guaranteed property rights among the coloni5ers, encouraged free trade, and created a single currency with fixed exchange rates, standardi5ed weights and measures, capital markets, a well developed system of railways and telegraphs, a civil service that aimed to be free from political interference, and a common-law, adversarial legal system. IndiaDs colonisation by the 3ritish coincided with major changes in the world economyPindustrialisation, and significant growth in production and trade. =owever, at the end of colonial rule, India inherited an economy that was one of the poorest in the developing world, with industrial development stalled, agriculture unable to feed a rapidly growing population, one of the worldDs lowest life expectancies, and low rates of literacy. An estimate by (ambridge 7niversity historian Angus #addison reveals that IndiaDs share of the world income fell from 00.;F in 1<44, comparable to *uropeDs share of 01.1F, to a low of 1.>F in 12:0. &hile Indian leaders during the Independence struggle, and leftnationalist economic historians have blamed colonial rule for the dismal state of IndiaDs economy.

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The impact of MNC on Indian Economy.

-# Inde,enden-e %o "<<"

Growth rate of India's real GDP per capita (Constant Prices: Chain series) (1950 20012) Data !o"rce: Penn #orld ta$les Indian economic policy after independence was influenced by the colonial experience, !olicy tended towards protectionism, with a strong emphasis on import substitution, industrialisation, state intervention in labour and financial markets, a large public sector, business regulation, and central planning. Hawaharlal .ehru, the first prime minister, along with the statistician !rasanta (handra #ahalanobis, carried on by Indira $andhi formulated and oversaw economic policy. ,hey expected favourable outcomes from this strategy, because it involved both public and private sectors and was based on direct and indirect state intervention, rather than the more extreme -oviet-style central command system. ,he policy of concentrating simultaneously on capital- and technology-intensive heavy industry and subsidising manual, low-skill cottage industries was critici5ed by economist #ilton +riedman, who thought it would waste capital and labour, and retard the development of small manufacturers. IndiaDs low average growth rate from 126<N>4 was derisively referred to as the =indu rate of growth, because of the unfavourable comparison with growth rates in other Asian countries, especially the Q*ast Asian ,igersQ.

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The impact of MNC on Indian Economy.

Af%er "<<" '

In the late >4s, the government led by %ajiv $andhi eased restrictions on capacity expansion for incumbents, removed price controls and reduced corporate taxes. &hile this increased the rate of growth, it also led to high fiscal deficits and a worsening current account.

d# Go4ern5en% In%er4en% on'

S%!%e ,l!nn n) !nd %he 5 =ed e-ono5& After independence, India opted for a centrally planned economy to try to achieve an effective and e?uitable allocation of national resources and balanced economic development. ,he process of formulation and direction of the +ive-9ear !lans is carried out by the !lanning (ommission, headed by the !rime #inister of India as its chairperson.

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The impact of MNC on Indian Economy.

%he n"&$er of people e&plo'ed in non(a)ric"lt"ral occ"pations in the p"$lic and pri*ate sectors %otals are ro"nded Pri*ate sector data relates to non(a)ric"lt"re esta$lish&ents with 10 or &ore e&plo'ees IndiaDs mixed economy combines features of both capitalist market economy and the socialist command economy, but has shifted more towards the former over the past decade. ,he public sector generally covers areas which are deemed too important or not profitable enough to leave to the market, including such services as the railways and postal system. -ince independence, there have been phases of nationali5ing such areas as banking and, more recently, of privati5ation.

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The impact of MNC on Indian Economy.

># IM1ACTS OF MNC

!# E-ono5 - Refor5$ n Ind ! $ n-e "<<"
The T.rn!ro.nd *conomic reforms were introduced by the %ajiv $andhi government @12>:->2A, it was the .arasimha %ao $overnment that gave a definite shape and start to the new economic reforms of globali5ation in India. !resenting the 1221-20 3udget, +inance #inister #anmohan -ingh saidE RAfter four decades of planning for industriali5ation, we have now reached a stage where we should welcome, rather fear, foreign investment. /irect foreign investment would provide access to capital, technology and market.S In the #emorandum of *conomic !olicies dated August 0<, 1221 to the I#+, the +inance #inister submitted in the concluding paragraphE R,he $overnment of India believes that the policies set forth in the #emorandum are ade?uate to achieve the objectives of the program, but will take any additional measures appropriate for this purpose. In addition, the $overnment will consult with the +und on the adoption of any measures that may be appropriate in accordance with the policies of the +und on such consultations.S *ra of 1221 Indian economy had experienced major policy changes in early 1224s. ,he new economic reform, popularly known as, 'iberali5ation, !rivati5ation and $lobali5ation @'!$ modelA aimed at making the Indian economy as fastest growing economy and globally competitive. ,he series of reforms undertaken with respect to industrial sector, trade as well as financial sector aimed at making the economy more efficient.
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The impact of MNC on Indian Economy.

&ith the onset of reforms to liberali5e the Indian economy in Huly of 1221, a new chapter has dawned for India and her billion plus population. ,his period of economic transition has had a tremendous impact on the overall economic development of almost all major sectors of the economy, and its effects over the last decade can hardly be overlooked. 3esides, it also marks the advent of the real integration of the Indian economy into the global economy. Indian economy was in deep crisis in Huly 1221, when foreign currency reserves had plummeted to almost K1 billionT Inflation had roared to an annual rate of 1< percentT fiscal deficit was very high and had become unsustainableT foreign investors and .%Is had lost confidence in Indian *conomy. (apital was flying out of the country and we were close to defaulting on loans. -o in order to over situation follow policies and steps were initiated by then 7!A government under the leadership of .arasimha %ao. De4!l.!% on' In 1221, India still had a fixed exchange rate system, where the rupee was pegged to the value of a basket of currencies of major trading partners. India started having balance of payments problems since 12>:, and by the end of 1224, it found itself in serious economic trouble. ,he government was close to default and its foreign exchange reserves had dried up to the point that India could barely finance three weeksB worth of imports. As in 12;;, India faced high inflation and large government budget deficits. ,his led the government to devalue the rupee. At the end of 1222, the Indian %upee was devalued considerably. ,herefore the first steps towards globali5ation were taken with the announcement of the devaluation of Indian currency by 1>-12 percent against major currencies in the international foreign exchange market. In fact, this measure was taken in order to resolve the 3)! crisis.

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The impact of MNC on Indian Economy.

D $ n4e$%5en% In order to make the process of globali5ation smooth, privati5ation and liberali5ation policies are moving along as well. 7nder the privati5ation scheme, most of the public sector undertakings have beenI are being sold to private sector. (ompany such as #odern +oods India 'td., 3A'(), an aluminium company. and very recent example is coal. D $5!n%l n) of %he Ind.$%r !l L -en$ n) Re) 5e At present, only six industries are under compulsory, 'icensing mainly on accounting of environmental safety and strategic considerations. A significantly amended locational policy in tune with the liberali5ed licensing policy is in place. .o industrial approval is re?uired from the government for locations not falling within 0: kms of the periphery of cities having a population of more than one million. Allo* n) Fore )n D re-% In4e$%5en% &ith the initiation of new economic policy in 1221 and subse?uent reforms process, India has witnessed a change in the flow and direction of foreign direct investment @+/IA into the country. ,his is mainly due to the removal of restrictive and regulated practices such as The re5o4!l of ?.!n% %!% 4e re$%r -% on$ on 5,or%$
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The impact of MNC on Indian Economy.

,rade policy reform has also made progress, though the pace has been slower than in industrial liberali5ation. 3efore the reforms, trade policy was characteri5ed by high tariffs and pervasive import restrictions. Imports of manufactured consumer goods were completely banned. +or capital goods, raw materials and intermediates, certain lists of goods were freely importable, but for most items where domestic substitutes were being produced, imports were only possible with import licenses. ,he criteria for issue of licenses were nontransparentT delays were endemic and corruption unavoidable. ,he economic reforms sought to phase out import import duties. licensing and also to reduce

Ind !n E=,or%$ O4er4 e* 2 n R$# Crore3 YEAR "<<A/<" "<<"/<0 "<<0/<7 "<<7/<; "<<;/<> "<<>/<D 0AA;/0AA> 0AA>/0AAD 0AAC/0AAB 0AAB/0AA< 0AA</0A"A 0A"A/0A"" E@1ORTS 70>>B ;;A;0 >7DBB D<C>" B0DC; "AD7>7 ""BB"C "7A"A" "7<C>7 "><>D" 0A7>C" 0A<A"B GROWTH RATE "C#C 7>#7 0"#< 0<#< "B#> 0B#D ""#C <#> C#; ";#0 0C#D 00#DB
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The impact of MNC on Indian Economy.

0A""/0A"0 0A"0/0A"7

0>>"7C 0<77DC

"B#<< "0#0<

Thro* n) O,en Ind.$%r e$ Re$er4ed For The 1.(l - Se-%or %o 1r 4!%e 1!r% - ,!% on# ,he list of industries reserved solely for the public sector -- which used to cover 1> industries, including iron and steel, heavy plant and machinery, telecommunications and telecom e?uipment, minerals, oil, mining, air transport services and electricity generation and distribution -- has been drastically reduced to threeE defense aircrafts and warships, atomic energy generation, and railway transport. Industrial licensing by the central government has been almost abolished except for a few ha5ardous and environmentally sensitive industries. ,he re?uirement that investments by large industrial houses needed a separate clearance under the Mono,ol e$ !nd Re$%r -% 4e Tr!de 1r!-% -e$ A-% to discourage the concentration of economic power was abolished and the act itself is to be replaced by a new competition law which will attempt to regulate anticompetitive behavior in other ways +or eg power generation, transmission and distribution in #umbai @,ata and reliance powerA +oreign direct investment in India increased from 7- K 102 million in 1221-20 to 7-K 0,016 million in April 0414. ,he cumulative amount of +/I e?uity inflows from August 1221 to April 0414 stood at 7-K 116,;60 million, according to the data released by the /epartment of Industrial !olicy and !romotion @/I!!A. ,oday, India provides highest returns on +/I than any other country in the world. ,herefore, India is evolving as one of the Dmost favored destinationD for +/I in Asia and the !acific.

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The impact of MNC on Indian Economy.

Ind !n M.l% n!% on!l Co5,!n e$ 2MNC3 India Inc. is flying high. .ot only over the Indian sky. #any Indian firms have slowly and surely embarked on the global path and lead to the emergence of the Indian multinational companies. &ith each passing day, Indian businesses are ac?uiring companiesB abroad, becoming world-popular suppliers and are recruiting staff cutting across nationalities. &hile an Asian !aint is painting the world red, ,ata is rolling out Indicas from 3irmingham and -undram +asteners nails home the fact that the Indian company is an entity to be reckoned with.

,ata #otors sells its passenger-car Indica in the 7" through a marketing alliance with %over and has ac?uired a /aewoo (ommercial Gehicles unit giving it access to markets in "orea and (hina.

%anbaxy is the ninth largest generics company in the world. An impressive <; percent of its revenues come from overseas.

/r %eddyDs 'aboratories became the first Asia !acific pharmaceutical company outside Hapan to list on the .ew 9ork -tock *xchange in 0441.

Asian !aints is among the 14 largest decorative paints makers in the world and has manufacturing facilities across 06 countries.

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The impact of MNC on Indian Economy.

-mall auto components company 3harat +orge is now the worldDs second largest forgings maker. It became the worldDs second largest forgings manufacturer after ac?uiring (arl /an !eddinghaus a $erman forgings company last year. Its workforce includes Hapanese, $erman, American and (hinese people. It has 11 customers across the world and only 11 percent of its turnover comes from India..

About >4 percent of revenues for ,ata (onsultancy -ervices come from outside India. ,his month, it raised %s :6.0 billion @K1.1< billionA in AsiaDs second-biggest tech I!) this year and IndiaDs largest I!) ever

Refor5$ n A)r -.l%.re A common criticism of IndiaBs economic reforms is that they have been excessively focused on industrial and trade policy, neglecting agriculture which provides the livelihood of ;4 percent of the population. =owever, the notion that trade policy changes have not helped agriculture is clearly a misconception. ,he reduction of protection to industry, and the accompanying depreciation in the exchange rate, has tilted relative prices in favor of agriculture and helped agricultural exports. ,he index of agricultural prices relative to manufactured products has increased by almost 14 percent in the past ten years. ,he share of IndiaBs agricultural exports in world exports of the same commodities increased from 1.1 percent in 1224 to 1.2 percent in 1222, whereas it had declined in the ten years before the reforms. +or example, the direct benefit of subsidi5ing fertili5er and underpricing water and power goes mainly to fertili5er producers and high income farmers while having negative effects on the environment and production, and even on income of small farmers.

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The impact of MNC on Indian Economy.

Infr!$%r.-%.re De4elo,5en% %apid growth in a globali5ed environment re?uires a well-functioning infrastructure including especially electric power, road and rail connectivity, telecommunications, air transport, and efficient ports. India lags behind east and southeast Asia in these areas. ,hese services were traditionally provided by public sector monopolies but since the investment needed to expand capacity and improve ?uality could not be mobili5ed by the public sector, these sectors were opened to private investment, including foreign investment. (ivil aviation and ports are two other areas where reforms appear to be succeeding, though much remains to be done. ,wo private sector domestic airlines, which began operations after the reforms, now have more than half the market for domestic air travel. =owever, proposals to attract private investment to upgrade the major airports at #umbai and /elhi have yet to make visible progress. In 122>, a tax was imposed on gasoline @later extended to dieselA , the proceeds of which are earmarked for the development of the national highways, state roads and

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The impact of MNC on Indian Economy.

rural roads. ,his will help finance a major program of upgrading the national highways connecting /elhi, #umbai, (hennai and (alcutta to four lanes or more. ,he railways are a potentially important means of freight transportation but this area is untouched by reforms as yet. ,he *xpert $roup on Indian %ailways @0440A recently submitted a comprehensive program of reform converting the railways from a departmentally run government enterprise to a corporation, with a regulatory authority fixing the fares in a rational manner. .o decisions have been announced as yet on these recommendations.

F n!n- !l Se-%or Refor5 IndiaBs reform program included wide-ranging reforms in the banking system and the capital markets. 3anking sector reforms includedE @aA measures for liberali5ation, like dismantling the complex system of interest rate controls, eliminating prior approval of the %eserve 3ank of India for large loans, and reducing the statutory re?uirements to invest in government securitiesT measures for increasing competition like more liberal licensing of private banks and freer expansion by foreign banks. ,hese steps have produced some positive outcomes. ,here has been a sharp reduction in the share of nonperforming assets in the portfolio and more than 24 percent of the banks now meet the new capital ade?uacy standards. IndiaBs banking reforms differ from those in other developing countries in one important respect and that is the policy towards public sector banks which dominate the banking system.

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The impact of MNC on Indian Economy.

So- !l Se-%or De4elo,5en% n He!l%h !nd Ed.-!% on +or example, IndiaBs adult literacy rate in 1221 was :0 percent, compared with :< percent in Indonesia and <2 percent in ,hailand in 12<1. ,he gap in social development needed to be closed, not only to improve the welfare of the poor and increase their income earning capacity, but also to create the preconditions for rapid economic growth. (losing the social sector gaps between India and other countries in southeast Asia will re?uire additional expenditure, which in turn depends upon improvements in the fiscal position of both the central and state governments. !art of the solution lies in greater participation by the beneficiaries in supervising education and health systems, which in turn re?uires decentrali5ation to local levels and effective peoplesB participation at these levels. .ongovernment organi5ations can play a critical role in this process. /ifferent state governments are experimenting with alternative modalities but a great deal more needs to be done in this area.
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The impact of MNC on Indian Economy.

&hile the challenges in this area are enormous, it is worth noting that social sector indicators have continued to improve during the reforms. ,he literacy rate increased from :0 percent in 1221 to ;: percent in 0441, a faster increase in the 1224s than in the previous decade, and the increase has been particularly high in the some of the low literacy states such as 3ihar, #adhya !radesh, 7ttar !radesh and %ajasthan. .

D# Con-l.$ on$
#ultinational companies are like double-edged sword. ,he sword can harm if not handled properly. -imilarly the #ultinational companies have their own pros and cons. ,he extent of technology and management of know-how transfer by the #.(s depend to a large extent on their corporate strategyT for example, firms desiring to have a longer-term relationship with the suppliers @rather than those simply using the host country as a marketingIexport baseA will be more inclined to effect transfer technology. As pointed out in the &orld Investment %eport, 0444, #.(s may restrict the access of particular affiliates to technology in order to minimise inter-affiliate competition. It is noted that #.(s are more likely to licence older technologies from which they have already derived significant rents than newer technologies on which there are still relying for market leadership. +urther, they may hold back the upgrading of the affiliate technology or invest insufficiently in host-country training and %C/.

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The impact of MNC on Indian Economy.

C# We(l o)r!,h&
www.ibef.org www.google.com www.cii.com www.ficci.com www.indoinfoline.com

B# B (l o)r!,h&
International #arketing #anagement - #.G. "ulkarni International #arketing - +rancis (herunilam

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