ECONOMICS

Project
On
IMPACT OF MULTINATIONAL CORPORATION ON INDIAN
ECONOMY

ACKNOWLEDGEMENT
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I take this opportunity to thank profusely my lecturer Ms. Mitali Tiwari for providing me
with a platform to express my views on “IMPACT OF MULTINATIONAL
CORPORATION ON INDIAN ECONOMY” and to explore the unexplored depths of the
topic. Indeed, the experience has been insightful and most often, thought provoking. A
deeper understanding of such an important topic has enriched my knowledge.

I also wish to express my gratitude to all the library staff for their patience and cooperation in
helping me find the apt research material. My thanks further extend to all the other sources of
information and of course, to my friends and seniors, without whose insightful thoughts and
relevant criticisms, the project would not have been complete

. Last but not the least, I wish to thank my parents and the God Almighty for their help and
constant support through various means.

I also hope that I will be provided with similar opportunities to work on such other
interesting topics in the future.

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INTRODUCTION AND PLAN OF STUDY ........................................................................................ 4

OBJECTIVES ........................................................................................................................................ 6

DEVELOPMENT AND ACTIVITIES ................................................................................................. 6

GROWTH TREND OF MULTINATIONALS IN INDIA RECENT DEVELOPMENT .................... 8

INDIAN MARKET SIZE ...................................................................................................................... 9

INVESTMENTS .................................................................................................................................. 10

GOVERNMENT INITIATIVES ......................................................................................................... 11

Procter and Gamble (P&G), Gillette India trends of Growth in India: ................................................ 13

FINANCIAL RESULTS ...................................................................................................................... 14

Corporate Social Responsibility .......................................................................................................... 15

GROWTH OF INDIAN ECONOMY ................................................................................................. 16

Impact of Global Corporations on Indian Economy ............................................................................ 17

i) Increasing flow of Goods and Services ........................................................................................ 18

ii) Balance of Trade in Services ....................................................................................................... 18

iii) Increasing Flow of Capital ......................................................................................................... 18

iv) Information and Technology ..................................................................................................... 18

CONCLUSION .................................................................................................................................... 19

REFERENCES .................................................................................................................................... 21

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 INTRODUCTION AND PLAN OF STUDY
Since independence, India has gone through many changes firstly India based on socialist
model, but now it bases its government on a democratic model. During this period India had
a very protectionist stance against foreign investment in the country, because of this India fell
behind in technology and in economy. The collapse of the Soviet Union (India‟s largest
trading partner), the Persian Gulf crisis (higher world prices), and an increase in foreign dept.
led to problems for India throughout the eighties. The liberalization of Indian economy has
started during tenure of Dr. Mamohan Singh in the year 1991 as a Finance Minister and
carried out by Mr. Yashwant Sinha and Mr. Jaswant Singh simultaneously. The markets are
being flooded with a lot of brands from old and new brands from within the country and
multinationals who have ventured into India as a result of globalization of Indian economy.
This has resulted in a fight amongst competitors for survival and growth and also led them to
provide value to their product for customer‟s satisfaction through quality and service. The
domestic market is increasing because of the increasing of standard of living. The
multinationals are trying their best to bring in more modernize product at a higher price in the
Indian consumer market. The Indian consumer is very price conscious yet is willing to pay
for quality products and comfort. Indian economy had experienced major policy changes in
early 1990s. The new economic reform, popularly known as, Liberalization, Privatization and
Globalization (LPG model) aimed at making the Indian economy as fastest growing economy
and globally competitive. While multinational companies played a significant role in the
promotion of growth and trade in South-East Asian countries they did not play much role in
the Indian economy where import-substitution development strategy was followed. Since
1991 with the adoption of industrial policy of liberalization and privatization rote of private
foreign capital has been recognized as important for rapid growth of the Indian economy.
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Global markets, global technology, global ideas are seen as symbolizing enormous potential
to change the world through more wealth than at any time before. A number of companies
worldwide are coming together by way of mergers and joint ventures in order to consolidate
their strengths and to take advantage of opportunities of global trade. After adopting new
economic policy many global corporations entered in the Indian economy. The object of this
study is to find out the impact of the entry of multinational companies in the Indian Market
and economic growth of India. This topic is of great importance, as the entry of Multinational
in India will have a great effect on the Indian producers as they have to make efforts to exist
in this competitive environment. To overcome this competition Indian producers will have to
have greater innovation and creativity so that the products can match those made by the
multinationals. Many countries are opening their borders and reducing trade barriers.
Multinational corporations are taking advantage of these inexpensive trade barriers and
moving in to these developing economies. The major way that these multinational
corporations capitalize on these opportunities is by engaging in direct foreign investment.
Foreign direct investment can be done in one of three ways. First a company can acquire a
foreign firm. The second way of engaging in foreign direct investment is to create a new
foreign subsidiary .Finally a company can get a partner and together they would start a
business in a foreign country. This is known as a joint venture, and is probably the most
popular way to gain local support. India also has an attractive resource base .The two main
resources it has low labor cost and an educated pool of management and technical personnel.
These benefits make India a competitor for foreign investment Multinationals was selected as
the research topic because the country‟s national economical growth and diversity adds a
new perspective to the study of cross-cultural management. Moreover, India has been
assuming a new role within the Asian and the global economy since the liberalization plan in
1991. The international community has become increasingly interested in developing
awareness in this complex Indian culture. India is currently one of the main receptors of
foreign direct investment in Asia. The enterprises involved in international business are
referred to in various ways: multinational corporations, transnational corporations, global
corporations, and so on. Sometimes, the terms are intended to designate a specific type of
operation, strategic approach or spatial location, but often such terms are used
interchangeably. It also happens that the meaning of the terms varies from author to author
and even changes over a period of time. MNC may be defined as a company, which operates
in number of countries and has production and service facilities out-side the country of its
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origin. They are also called Trans National Company (TNC) their activities have both good
and bad impacts on the economy. According to Spero and Hart “a multinational corporation
(MNC) as a business enterprise that maintains direct investments overseas and that upholds
value-added holdings in more than one country. They take decisions on a global context or
basis. Their maximum profit objectives take no account of the reactions produced in the
countries felling in their orbit. They operate in different institutional forms some are:
Subsidiaries companies wholly owned by MNC in other countries Subsidiary company enter
into joint venture with a company another company Agreement among companies of
different countries regarding production and discussion of market.. This project highlights on
trend of growth of foreign companies in India, their country wise distribution and their
impact on Indian economy. More specifically the objectives of the study are: To study the
trend of growth of global corporations in India, to analysis country wise distribution of global
corporations in India and to study the impact of increasing global corporate on Indian
economy with special reference to Procter and Gamble (P&G).

OBJECTIVES

• To Study the trend of growth of Multinational corporations in India

• To analyse the market share of Multinationals and their investments in India

• To study the impact of global corporations on Indian economy

DEVELOPMENT AND ACTIVITIES

In the report of the International Labour Organization (ILO), it is observed that “the essential
of the MNCs lies in the fact that the managerial headquarters are located in the home country,
while the enterprise carries out operations in a number of other countries (Host Countries).”
The early decades of the twentieth century witnessed the multinational expansion of
European companies such as Unilever, Royal Dutch Shell, Imperial Chemical Industries and
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Philips. In the 1950s and 1960s, following the emergence of the USA as the world‟s
dominant industrial power at the end of the Second World War, multinationals such as
General Motors Corporation, Ford Motor Company, International Business Machines, Coca-
Cola and Procter & Gamble took on a prominent role in international business expansion
through foreign subsidiaries. The Japanese multinational expansion of the 1970s and
1980swas characterized by global strategies commanded by home based headquarters and
manufacturing facilities. A number of companies worldwide are coming together by way of
mergers and joint ventures in order to consolidate their strengths and to take advantage of
opportunities of global trade.
The world's largest consumer goods company, Procter & Gamble (P&G), appears to be
slowly but steadily getting its act together in India, after announcing recently that it was
moving away from unprofitable businesses. The latest financial results of Gillette India, one
of its two listed companies, had it reporting double-digit revenue growth for the three months
ended March, after consecutive quarters of single-digit growth. Procter & Gamble Hygiene
and Healthcare, the other listed company, reported double-digit revenue growth for a second
quarter in a row. Its earlier single-digit sales growth was for the three months ended
September 2015. Both listed entities follow a July-June accounting period. Results for a third
firm, Procter & Gamble Home Products, are not available in the public domain. On profit,
Gillette reported triple-digit growth for the March quarter; P&G Hygiene and Healthcare
reported double-digit growth. A company spokesperson, when asked, said, "India remains a
critical market for P&G. In the past 18 months, P&G India has become profitable. The results
that India has delivered have contributed positively to the health of the parent company."
In an analyst call last month, its global finance head, Jon Moeller, said the firm had made a
choice to de-prioritise several unprofitable lines of business which negatively impacted short-
term revenue growth rates in India. "The strategic portion of our India business is growing at
a high single-digit pace. Sales in the portions we're fixing or exiting have been down more
than 30 per cent. This top line pain is worth it. We're making significant progress in
improving local profit margins, up about 700 basis points," Moeller had said. Strategic
categories for P&G in India include baby care, where it has the Pampers brand; male
grooming, where Gillette sits; feminine care, which includes Whisper; health care, which
includes Vicks; fabric care, which has detergents such as Ariel and Tide; skin care, with
brands such as Olay, and hair care, which includes products such as Pantene and Head &
Shoulders. Abneesh Roy, associate director at Edelweiss Financial Services, had said in a
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report last month that P&G would probably exit Duracell (batteries), AmbiPure (air
fresheners), Old Spice (men's after-shave lotion) and Oral-B toothpaste in India. "Also, it
could defocus on lower-end Tide (detergent) and Wella (hair care products)."

The company has in the past few quarters attempted to move away from lower priced stock-
keeping units in detergents and cut shampoo prices by 25 per cent to shore up domestic
market share, analysts said. The firm, which crossed Rs 10,000 crore in turnover in financial
year ended June 2015, is among the top three in most of its core categories. The
spokesperson said P&G would continue to focus on core brands and variants in India, in line
with global strategy. Internationally, P&G is exiting 105 brands. These include Duracell
batteries, which it sold to Berkshire Hathaway, and 43 beauty products which sold to New-
York-based Coty Inc. last year.

GROWTH TREND OF MULTINATIONALS IN INDIA RECENT

DEVELOPMENT
The entry of Multinationals in India will have great effects on the Indian producers as they
have to make efforts to exist in this competitive environment. Most of the Indian consumer
belongs to the lower and lower middle class for mass consumption. They are many big
enterprises in India who are successfully marketing their products to the Indian masses. They
will in due course of time face the challenges that will be posed by the multinationals. The
upper and middle classes are also consumers of costly goods, which are essential for their
comfort and luxury. The multinational will be targeting the consumer of the all classes.

Indian consumer segment is broadly segregated into urban and rural markets, and is attracting
marketers from across the world. The sector comprises of a huge middle class, relatively
large affluent class and a small economically disadvantaged class, with spending anticipated
to more than double by 2025. India stood first among all nations in the global consumer
confidence index with a score of 133 points for the quarter ending September 2016. Further,
in the discretionary spending category, 68 per cent respondents from India indicated the next

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12 months as being good to buy, thus ensuring once again that India leads the global top 10
countries for this parameter during the quarter.

Global corporations view India as one of the key markets from where future growth is likely
to emerge. The growth in India‟s consumer market would be primarily driven by a
favourable population composition and increasing disposable incomes. A recent study by the
McKinsey Global Institute (MGI) suggests that if India continues to grow at the current pace,
average household incomes will triple over the next two decades, making the country the
world‟s fifth-largest consumer economy by 2025, up from the current 12th position. India’s
robust economic growth and rising household incomes are expected to increase consumer
spending to US$ 3.6 trillion by 2020. The maximum consumer spending is likely to occur in
food, housing, consumer durables, and transport and communication sectors. The report
further stated that India's share of global consumption would expand more than twice to 5.8
per cent by 2020.

INDIAN MARKET SIZE

The growing purchasing power and rising influence of the social media have enabled Indian
consumers to splurge on good things. The Indian consumer sector has grown at an annual
rate of 5.7 per cent between FY2005 to FY 2015. Annual growth in the Indian consumption
market is estimated to be 6.7 per cent during FY2015-20 and 7.1 per cent during FY2021-25.

The Indian fast-moving consumer goods (FMCG) companies have performed better than
their multinational peers as the combined revenue of country's seven leading FMCG
companies stood at US$ 11.1 billion in FY 2015-16, as compared with US$ 9.4 billion
revenue generated by select seven Multinational Companies (MNCs).

A study by US-based networking solution giant CISCO, reveals that in India, the second-
largest smart phone market globally, the number of smart phones is expected to grow
strongly to over 650 million by 2019. Indian smart phone shipments reached 103.6 million in
2015, thus crossing the 100 million mark, and becoming one of the fastest growing smart
phone markets in Asia Pacific region. Smartphone shipments rose to 30 million in July-
September 2016 quarter, maintaining its healthy traction with 11 per cent YoY growth. It is
estimated that smart phone sales in India will grow about 15 per cent to 125 million in 2017.
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The number of tablets is estimated to reach more than 18 million by 2019 in India, one of the
world‟s fastest growing Internet market.

The online retail sector in India is expected to be a US$ 1 trillion (Rs 660,000 crore) market
by 2020. Amazon expects India to become its quickest market to reach US$ 10 billion in
gross merchandise value (GMV) and to become its largest overseas market surpassing Japan,
Germany and the UK. The Indian beauty, cosmetic and grooming market is likely to reach
US$ 20 billion by 2025 from the current US$ 6.5 billion, on the back of growing aspirations
and rising disposable income of middle class.

INVESTMENTS
Following are some major investments and developments in the Indian consumer market
sector. US based food company Cargill Inc, aims to double its branded consumer business in
India by 2020, by doubling its retail reach to about 800,000 outlets. Yum! Brand plans to
open 100 Taco Bell outlets in India over the next five years, which makes Indian expansion a
key part of its plan to triple its outlets outside US to 1,000. Hamleys has stated that India is
one of the most important markets for Hamleys globally, and outlined plans of opening six
more stores, taking its total store count in the country to 32 by the end of March 2017.
Bobois Group, outlined plans of opening new stores in cities like Hyderabad, Chennai, Pune,
Kolkata and Ahmedabad, in order to make India one of its top five markets by 2021. Diageo,
the world’s largest spirit maker, has announced opening of a new business service center
called Diageo Business Services India (DBSI) in Bengaluru, which aims to increase its
workforce to 1,000 from 100 currently. Amway, India’s largest company in the Rs 7,500
crore (US$ 1.12 billion) direct selling market, plans to invest Rs 400 crore (US$ 60 million)
over the next five years to expand its product portfolio and open 50 ‘express’ stores in top 20
cities of India, in addition to strengthening its e-commerce website.
Furlenco, an online furniture rental company, has raised US$ 30 million of funding led by
Light Box Ventures, Axis Capital and a number of high net-worth individuals, which will be
used to expand its geographical presence and product offerings in the next 12 months.

Dyson, the UK-based manufacturer of innovative vacuum cleaners and air purifiers, plans to
enter Indian consumer market by 2017 and invest GBP 154 million (US$ 190 million) over
the next five years in areas of retail infrastructure, marketing, promotion and taxes to the
government.
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Zefo, a Bengaluru-based refurbished goods marketplace, has raised Rs 40 crore (US$ 6
million) in a funding round led by Sequoia India, with participation from Beenext and Helion
Venture Partners, which will be used to expand its team, invest in technology, and expand its
presence in Mumbai and Delhi, which were recent additions. Adidas India Private Limited,
outlined plans of opening around 30-40 big flagship stores across Delhi, Mumbai and
Bengaluru, by 2020.

Swiss watchmaker Montres Corum Sàrl, better known as Corum, has partnered with the
luxury watch retailer Ethos Watch Boutiques to sell Corum watches in India, in order to
strengthen its presence in India by rebuilding its distribution network and boosting revenues.
AO Smith, a US based water technology and air purification solutions company, sees India as
one of key markets and plans to grow at double-digit growth rate, having invested US$ 75
million so far. Crocs India Pvt Ltd, outlined plans of increasing its store count in India from
38 to 100 by the end of 2017, and increasing its focus on the casual footwear category to
expand its consumer base and thereby boost its overall revenue.

GOVERNMENT INITIATIVES
The Government of India has allowed 100 per cent Foreign Direct Investment (FDI) in online
retail of goods and services through the automatic route, thereby providing clarity on the
existing businesses of e-commerce companies operating in India. With the demand for skilled

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labour growing among Indian industries, the government plans to train 500 million people by
2022 and is also encouraging private players and entrepreneurs to invest in the venture. Many
governments, corporate and educational organisations are working towards providing
training and education to create a skilled workforce. The Government of India has drafted a
new Consumer Protection Bill with special emphasis on setting up an extensive mechanism
to ensure simple, speedy, accessible, affordable and timely delivery of justice to consumers.
In the Union Budget 2017, the government has proposed to spend more on the rural side
with an aim to double the farmer’s income in five years; as well as the cut in income tax rate
targeting mainly the small tax payers; focus on affordable housing and infrastructure
development will provide multiple growth drivers for the consumer market industry.
Union Cabinet reforms like implementation of the Goods and Services Tax (GST) and
Seventh Pay Commission are expected to give a boost to consumer durable sector in India.

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 Procter and Gamble (P&G), Gillette India trends of Growth in India:

The Company’s positive performance results for the Financial Year 2015-16, against a
backdrop of challenging market environment, are testament to the focus on winning with the
consumer. The Company’s net sales for the financial year 2015-2016 went up by 4% versus
last year, driven by Company’s focus on brand fundamentals and strength of product
portfolio. Profit after Tax (PAT) for the Financial Year went up by 35% behind focus on
productivity and cost optimization. As one of the world’s largest consumer products
Company, they had both a responsibility and an opportunity to do the right thing and create
change. This strategy has inspired an enduring CSR strategy supported by two pillars –

P&G Shiksha and Timely Disaster Relief. While P&G Shiksha provides children from
underprivileged backgrounds with an access to a holistic education, P&G's disaster relief
activities aim to rehabilitate and empower the victims of natural disasters by providing them
with daily essential commodities and safe drinking water. By the end of Financial Year 2015-
16, P&G Shiksha built and supported over 1,000 (+550 since last year) schools across the
country that will impact the lives of over 1 million (+200,000 since last year) children. P&G,
over the last year, continued its efforts to provide timely aid and relief to families affected by
natural disasters. P&G sent out relief aid to over 10,000 families affected by the Tamil Nadu
floods comprising of P&G products. Any company that wants to drive growth and create
value in the long run needs to adopt a mindset of winning.
Driven by the Company’s focus on brand fundamentals and strength of product portfolio, net
sales increased to 2,052 crores, up 4% versus last year. The Company made strategic
portfolio choices that have resulted in strong margin improvement as Profit after Tax (PAT)
for the Financial Year stood at 213 crores versus 158 crores last year, behind continued focus
on productivity, operational excellence and cost optimization. The Company has benefited

13
from the portfolio optimization, even as it continues to focus on productivity and cost
efficiency.

FINANCIAL RESULTS

(Figures in Crores)

2015-16 2014-15

Sales including excise 2071 1981

Net sales (less excise duty) 2052 1971

Profit before tax 327 246

Profit after tax 213 158

Proposed dividend plus tax thereon 78 59

Transfer to general reserve 21 16

Balance carried forward 421 341

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 Corporate Social Responsibility

The only way to build a sustainable business is to improve lives At P&G, sustainability
means making every day better for people through how we innovate and how we act. As one
of the world‟s largest consumer products Company, we have both a responsibility and an
opportunity to do the right thing and create change. P&G‟s sustainability objective is to
create long-term value for our consumers and shareholders by growing our brands and
operations responsibly to conserve resources and improve life in the communities we impact
across the world. This strategy has inspired an enduring CSR strategy supported by two
pillars – P&G Shiksha and Timely Disaster Relief. While P&G Shiksha provides children
from underprivileged backgrounds with an access to a holistic education, P&G's Timely
Disaster Relief activities aim to rehabilitate and empower the victims of natural disasters by
providing them with daily essential commodities and safe drinking water.

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 GROWTH OF INDIAN ECONOMY
India has become the sixth largest manufacturing country in the world, rising up from the
previous ninth position, and thus retaining its bright spot in the world economic landscape.
Post the demonetization announcement, the pace of remonetisation has picked up, and it is
expected that the effects of demonetisation will not spill over into the next financial year.
The IMF expects the Indian economy to grow by 6.6% in 2016– 17, which is not only a
significant one percentage point lower than the previous estimate, but also brings India back
to the status of the second-fastest growing economy, especially as China is expected to
outgrow by 6.7%. However, this is cited as the result of short-term disruption caused by the
government‟s move to invalidate high-value currencies, which dampened the economy‟s
biggest growth drivers – consumption and investment demand. Recognising the strength of
Indian economic fundamentals, the IMF expects the impact of demonetization to fade away
gradually, as it pegs the 2017–18 growth at 7.2%, overtaking China again by a good 0.7
percentage points. The World Bank, however, is more optimistic and has projected a GDP
growth of 7% in 2016–17, 7.6% in 2017–18 and 7.8% in 2018–19. Clearly, what makes
India resilient to global flurries, to a great extent, is its rocksolid domestic demand,
accounting for about 60% of the GDP. This figure is 37% for China, and this has led the
Chinese economy‟s restructuring and rebalancing to rely less on exports and investment and
more on consumption demand. The broad macroeconomic indicators, based on latest data,
are as follows:

Inflation: The retail inflation stayed above the comfort zone of 5% till August 2016, but
it started moderating thereafter during the normal monsoon, dropping to a two-year low
of 3.4%. The average for the year-to-date (April-December 2016) stood at 4.85%, a tad
higher than 4.8% during the same period of the previous year.

Fiscal Deficit: The fiscal deficit as a percentage of GDP was budgeted at 3.5% for 2016–17
in the previous year‟s budget. This is revised to 3.2% for 2017–18.

Trade Deficit: India‟s trade deficit narrowed by 25% in the cumulative period of April to
December 2016 when it stood at $76.5 billion, as against $100.1 billion in the
corresponding period of the previous year. This is on the back of a 7.4% decline in
imports coupled with a meager growth of 0.75% in exports during said period. Imports of
both oil and non-oil products dropped during this period by 10.76% and 6.42%,
respectively, reflecting the subdued gross capital formation.

Currency: The rupee saw a depreciation of 3.3%, as it stood at an average of ₹67.21 per
US dollar during April 2016 to January 2017 against an average of ₹65.03 per US dollar
during the same period in the previous year.

Future Outlook: According to the Central Statistical Organization‟s first advance estimates
for 2016–17, the GDP is expected to grow by 7.1%, which is slower than 7.6% in the
previous year. However, this discounts the impact of demonetization. Factoring in this
impact, we expect the growth to decline by another about 50 basis points.

Impact of Global Corporations on Indian Economy

The operation of the global corporations increases with the reduction of barriers to trade and
investment. The benefit of larger world trade, larger incomes, lower cost and prices due to
economy scale follow for their operations. The share of global capital raises productivity and
wages by shifting employment from local to global market. The vast amount of unused
resources can be diverted to productive purposes. The inflow of funds would have
simultaneously led to the growth of allied industries that also help to increase employment
opportunities indirectly. The functioning of global corporate has been said to make its impact
on the economic structure and social systems in the country. Impact of global corporate can
be examined on the basis of the parameters as follows.

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i) Increasing flow of Goods and Services

The observation of the total foreign trade, the exports are increasing at a decreasing rate but
the imports are increasing at an increasing rate during the period of 1991-2012. India‟s total
trade increased from Rs. 91893 crore in 1991-92 to Rs. 22205809 crore in 2015-16.

ii) Balance of Trade in Services

Services trade surplus which increased steadily in this decade to reach US$53.9 billion in
2008-09, fell drastically in the global crisis year of 2009-10 to US$ 35.7 billion. This was
caused by the collapse in exports of non-software services, particularly business services,
the slow growth of software services, and the rise in import of non software services,
particularly business and financial services. The low service trade surplus situation
continued in the first half of 2010-11.

iii) Increasing Flow of Capital

It is observed that with increase in number of foreign companies the amount of FDI also
goes on increasing but it is in many folds. In 1991 number of foreign companies was
489and FDI was $129 mn. In 2001 number of foreign companies increased as 1141the
amount of FDI was US $ 4031 Million that increased more than seven times i.e. US $ 29029
Million and in 2012 number of foreign companies increased as 3191, the amount of FDI
also increased as US $ 32952Million.

iv) Information and Technology

7,941 technology transfer approvals sanctioned by the government during 1991 -2011. USA
ranks number one in providing technology to India with 1750 approvals since 1991. The

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sector wise technology transfers out of the total technology transfer approvals. Electrical
equipment including computer hardware and software sector made highest technology
transfers i.e.1255 technology transfer agreements concluded from the rest of the world over
a period of 18 years i.e.1991 – 2008.

Many MNCs help in improving the infrastructure and provision of basic needs in their
specific areas of operation. They either do so directly or provide funds for this purpose to
civil society organizations. This also improves business conditions within and in the vicinity
of the areas where they are operating. In some cases, large-scale economies, quality control
and a healthy competition lead to price cuts and other benefits for the end-user. People have
more access to the comforts of life with a large variety of choices. Another significant
advantage of foreign companies is its contribution to government revenues.

CONCLUSION

When we consider an overall picture of the MNCS, the beneficial role is much limited in the
limited stages of development they are helpful in area of needed technology and global
marketing. They care only to the need of upper middle and affluent classes. It creates a new
culture of colas, jams, ice-creams and processed goods. Another threat to Indian economy is
the manipulation on the capital market to suit their goals. They are increasing the
shareholding in Indian companies swallowing them. They transfer attractive and profitable
business to these newly started subsidiaries so a large number of Indian shareholders get
cheated. Summing up over dependence on MNC may be harmful in terms of economic
dependence and political interference. Capital flow of MNC's may be permitted but not at
the cost of national interest. At present the world economy is an integrated economy i.e. a
world without borders, a world in which all goods and factors can be transported across
different regions at negligible cost. Some industries spread their production process across
many regions searching for the ideal environment for each specific phase of production. The
magnitude and dimensions of human activities are squarely rising. The concept like 'closed

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economy' and protectionist policies are being gradually replaced by 'market based global
corporate economy‟.

Thus the most significant development in international economic scenario during the past
two decades has been spectacular rise in power and influence of giant global corporate. It
may be said that the role of the global corporate is crucial and their existence is
indispensable. However, their functioning needs proper regulation so as to ensure protection
of national interests and to maintain the character of national economy as a separate family
of the global economy. In the present international environment, though, it seen difficult to
follow a close door policy, yet it should not be an open policy as well. We have to be
selective for allowing the foreign investment and at the same time we must encourage the
indigenous industry.

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