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ROLE OF MNCs IN THE DEVELOPMENT OF INDIAN ECONOMY. Introduction :
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ROLE OF MNCs IN THE DEVELOPMENT OF INDIAN ECONOMY .
Introduction: Multinational corporation is a corporation or enterprise that manages production establishment or delievers services in at least two countries. Very large multinationals have budgets that exceed those of many countries. Multinational corporations can have a powerful influence in international relations and local economies. Multinational corporations play an important role in globalisation : the ‘globall integrated enterprise.
MNCs are not in India if we look in the Past British East India company and Dutch east India companies were there which came to India for trade and by taking advantage of political conditions of India gained power. After adopting new economic policy by govt. of India in july 1991 may MNCs came in the Indian economic scene because the govt. of India gave many incentives to the foreign investors. So it is clear that govt. opened the doors of Indian market to MNCs.
MULTINATIONAL CO./ GLOBAL ENTERPRISES Multinational consists of 2 different words ‘multi’ and ‘national’. Multi means many and national means countries or nations. So multinational means a co. which operates in many countries. Such a co. has branches, factories, workshops in different countries. A multinational corporation is known as a transnational corporation, global enterpries or international enterprise. The head quarters of MNCs are located in home country and it carries business in host countries. MNCs incorporated in Home country.
MERITS / ROLE Of MULTINATIONAL CO. 1. EMPLOYMENT OPPORTUNITIES. MNCs create large scale employment opportunities in host countries. They incr ease the investment level, employment and income level. MNCs offer good salary package and career opportunities to its staff. 2. ADVANCED TECHNOLOGY. Develo ping countries are technologically backw ard. MNCs bring advanced technology to these countries. By this quality of produc ts are improved and reduce costs.
3.Foreign EXCHANGE. MNCs help the host countries to increase their exports and reduce their dependence on imports. 4. STANDARD OF LIVING. By providing superior products and services, the MNCs help to improve living standards in host countries. 5. WORLD ECONOMY. MNCs help to integrate national economy into world economy. They encourage international brotherhood and cultural exchange through international business. 6. FOREIGN CAPITAL. Developing countries suffer from shortage of capital required for rapid industrialisation. Mncs make direct foreign investment thereby speeding the process of economic development.
DEMERITS/NEGATIVE ROLE OF MNCs. 1.Disregard of NATIONAL OBJECTIVES the priorities of developing countries are strategic control and development of backward regions, whereas MNCs do not give any importance to these objectives. MNCs prefer to invest in profitable projects. 2. OBSOLETE TECHNOLOGY. MNCs generally transfer outdated technology to their collaborators in host countries. In host countries MNCs have failed to develop local skills and talents. 3. CREATION OF MONOPOLY. MNCs join hands with big business houses and give rise to monopoly and concentration of economic power in host countries.
4. RESTRICTED CLAUSES. Due to large resources and bargaining powers MNCs introduce restrictive clause in collaboration agreement, e.g pricing of the products will be fixed by MNCs. MNCs do not transfer research and development training and other facilities to host countries. 5. THREAT TO NATIONAL SOVEREIGNTY. MNCs pose a danger to the independence of host countries. Some MNCs like ITI are accused of overthrowing the GOVT. in countries such as chile. 6. DEPLETION OF NATIONAL RESOURCES. MNCs cause rapid depletion of some of the non- renewable natural resources in host countries.
JOINT VENTUREA Multinational co. may enter into joint venture with an indigenous firm or agency. The purpose of a joint venture is either to produce using technical know- how and managerial expert provided by foreign co. or to market the products of the foreign co..In joint venture, both the co. contribute capital and share the profit. When 2 or more firms join together to establish a new enterprise then it is known as a joint venture.
MNCs AND INDIAN INDUSTRIES Some economists think that MNCs are helpful for Indian industrial sector they think that Indian companies learn new techniques of prod. And new mgmt. techniques with the arrival of MNCs in the Indian economic scene. MNCs increase competition in the industrial sector so when the Indian co. compete with global giants they improve in their working. With the enterance of MNCs in India demand for skilled persons increase to a great extent so more and more people are skillful and the problem of skilled persons is solved for an indian industries also. There are some economists who have some different opinion according to them the technology transferred by them is not useful for countries like india because MNCs use capital intensive technique and developing countries have scarce capital and labou so the technology they transfer is of little use.
MNCs AND AGRICULTURE:Indian economy is an agarian economy; a major part of the population depends on agriculture directly or indirectly. If we go back to past few decades Indian agriculture was considerd backward but now the time is changing and MNCs such as Mahyco-Monsanto help in modernising Indian agriculture. They provide modern agriculture inputs such as HYV seeds, pesticides, fertilizers and modern agriculture equipments to the Indian farmers and thus Indian agriculture has turned itslf from subsistence level to making profits. MNCs also encourage research activities in the field of agriculture in developing countries like India. if we see India with billion plus population , has put agriculture at the heart of its economy and food security at the center of its agriculture policy. In developing countries , MNCs encourage commercial farming b’coz they need cheap raw material . A big no. of Indian FARMERS ARE SMALL AND MEDIUM FARMERS who are not able to use expensive agriculture equipments so the gap is widening among rich and poor farmers which is disastrous for the agriculture. MNCs are making farmers dependent on HYV seeds provided by them and thus biodiversity of indian varieties are in danger.
MNCs from SOCIAL and MORAL viewpoint. MNCs are not fair in their working in the developing countries. Many MNCs are not paying their tax liability, they prefer to establish in the country where tax laws are not strict. And also environmental laws are also not strict. MNCs also responsible for misalocation of resources in the developing countries. They provide mainly luxurious products b’coz there is more profits in it.Another aspect, which judges MNCs morally, is political interference. Generally it is the practice of MNCs to gain the economic power in developing countries and then get politically power by giving help to the politicions at the time of elections, interfere in political matters which can cause a big danger to the sovereignty of developing countries.
DESTINATION INDIA The MNCs in india represent a diversified portfolio of co. from different countries. The majority of mncs in india, account 37 percent of the turnover of the top 20 firms operating in india, but the scenario has changed a lot off late. More enterprises from europian union like britain, france, Netherlands, italy,germany, belgium and finland have come to india or have outsources their works to this country. There mncs like british petroleum and vodafone that represent Britain. There also a no. of oil co. and infrastructure builders from middle east. Electronics giants like Samsung and LG electronics from south korea have already made a substantial impact on the indian electronics market. HYUNDAI motors has also done well in mid- segment car market in India.
WHY are MNCs in INDIA ? There are no. of reasons why the MNCs are coming down to India. India has got a huge market. It also got one of the fastest growing economies in the world. Besides, the policy of the GOVT. towards FDI has also played a major role in attracting the MNCs in India. For quite a long time, India had a restrictive policy nin terms of foreign direct investment. As a result, there was lesser no. of CO. That showed interest in investing in indian market. However, the scenari o changed during the financial liberalisation of the country, especially after 1991. GOVT., nowadays, makes continuous efforts to attract foreign investment by relaxing many of its policies. As a result, a number of MNCs have shown interest in Indian market.
Following are the reasons why MNCs consider India as a preferred destinatio n for business: * Huge market potential of the country. * FDI attractiveness. * Labour competitiveness. * Macro-economic stability. LIST of MNCs in INDIA. The list of MNCs in India is ever- growing as a number of MNCs are coming down to this country now and then. * British Petroleum. * Vodafone. * FORD MOTORS. * LG. * Samsung, HYUNDAI , Etc.
CONCLUSION : After discussing various aspects of MNCs in developing country like india the big question before us is whether MNCs play positive or negative role in developing countries? Generally the GOVTs. Of developing countries don’t keep control on the working of MNCs , which is major fault on their side. MNCs can be helpful for developing countries only when they are kept under control. We should not give incentives to the MNCs only b’coz they are coming from some powerful advanced countries. So, MNCs should face same rules and regulations as the domestic industries of the developing countries are facing. MNCs are the organizations or enterprises that manage production or offer services in more than 1 country. In fact, since the financial liberali zation in the country in 1991, the no. of MNCs in India has increased noticably. Though majority of the MNCs in India are from the U.S., however one can also find companies from other countries as well.
