Multinational Companies and Their Effects on Indian Economy

International Journal of Engineering Technology, Management and Applied Sciences

www.ijetmas.com June 2017, Volume 5, Issue 6, ISSN 2349-4476

622 Dr. Amit Kumar Khare

Multinational Companies and Their Effects on IndianEconomy

*Dr. Amit Kumar Khare,MBA, Ph.D

Lucknow University, Lucknow,Associate Professor

Rameshwaram Institute of Technology and Management

ABSTRACT: Since independence, India has gone through many changes firstly India based on socialist model, but nowit bases its government on a democratic model. During this period India had a very protectionist stance against foreigninvestment in the country, because of this India fell behind in technology and in economy. The collapse of the SovietUnion (India’s largest trading partner), the Persian Gulf crisis (higher world prices), and an increase in foreign dept ledto 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 Singhsimultaneously. The markets are being flooded with a lot of brands from old and new brands from within the country andmultinationals who have ventured into India as a result of globalization of Indian economy. This has resulted in a fightamongst competitors for survival and growth and also led them to provide value to their product for customer’ssatisfaction through quality and service. Indian economy had experienced major policy changes in early 1990s. The neweconomic reform, popularly known as, Liberalization, Privatization and Globalization (LPG model) aimed at making theIndian economy as fastest growing economy and globally competitive. While multinational companies played asignificant role in the promotion of growth and trade in South-East Asian countries they did not play much role in theIndian economy where import-substitution development strategy was followed. Since 1991 with the adoption of industrialpolicy of liberalization and privatization rote of private foreign capital has been recognized as important for rapidgrowth of the Indian economy. Global markets, global technology, global ideas are seen as symbolizing enormouspotential to change the world through more wealth than at any time before. A number of companies worldwide arecoming together by way of mergers and joint ventures in order to consolidate their strengths and to take advantage ofopportunities of global trade. After adopting new economic policy many global corporations entered in the Indianeconomy. This article highlights on trend of growth of foreign companies in India, their country wise distribution andtheir impact on Indian economy. More specifically the objectives of the study are: To study the trend of growth of globalcorporations in India, to analysis country wise distribution of global corporations in India and to study the impact ofincreasing global corporate on Indian economy with special reference to Procter and Gamble (P&G).

KEYWORDS: Multinational, Wealth, Economy, Global, Development, India, Globalization etc.

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

INTRODUCTION: 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 Indianconsumer market. The Indian consumer is very price conscious yet is willing to pay for quality products andcomfort. The object of this study is to find out the impact of the entry of multinational companies in the IndianMarket and economic growth of India. This topic is of great importance, as the entry of Multinational in Indiawill 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 andcreativity so that the products can match those made by the multinationals. Many countries are opening theirborders and reducing trade barriers. Multinational corporations are taking advantage of these inexpensivetrade barriers and moving in to these developing economies. The major way that these multinationalcorporations capitalize on these opportunities is by engaging in direct foreign investment. Foreign directinvestment can be done in one of three ways. First a company can acquire a foreign firm. The second way ofengaging in foreign direct investment is to create a new foreign subsidiary .Finally a company can get apartner and together they would start a business in a foreign country. This is known as a joint venture, and isprobably the most popular way to gain local support.

India also has an attractive resource base .The two main resources it has low labour cost and an educated poolof management and technical personnel. These benefit makes India a competitor for foreign investmentunfortunately for India, it is not only competitor in the world but also china who is main rival of India. Thishas been a classic rivalry since India began its reform. The object of this study is to find out the impact of theentry of multinational companies in Indian Market. The purpose of this research project was to exploremanagement practices that successful multinationals doing in India to manage economical growth anddiversity."Success" in this study is measured in terms of revenue growth through foreign direct investmentability and the extent to which the multinational meets corporate expectations. Multinationals was selected asthe research topic because the country’s national economical growth and diversity adds a new perspective tothe study of cross-cultural management. Moreover, India has been assuming a new role within the Asian andthe global economy since the liberalization plan in 1991. The international community has becomeincreasingly interested in developing awareness in this complex Indian culture. India is currently one of themain receptors of foreign direct investment in Asia. The enterprises involved in international business arereferred to in various ways: multinational corporations, transnational corporations, global corporations, and soon. Sometimes, the terms are intended to designate a specific type of operation, strategic approach or spatiallocation, but often such terms are used interchangeably. It also happens that the meaning of the terms variesfrom author to author and even changes over a period of time. MNC may be defined as a company, whichoperates in number of countries and has production and service facilities out-side the country of its origin.They are also called Trans National Company (TNC) their activities have both good and bad impacts on theeconomy. According to Spero and Hart “a multinational corporation (MNC) as a business enterprise thatmaintains direct investments overseas and that upholds value-added holdings in more than one country. Theytake decisions on a global context or basis. Their maximum profit objectives take no account of the reactionsproduced 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 venturewith a company another company Agreement among companies of different countries regarding productionand discussion of market. Development and Activities: Soon after independence foreign capital entered Indiain the form of direct investments through MNC's Companies had been formed in advanced countries with thespecific purpose of operating in India. Such companies started their subsidiaries, branches and affiliates inIndia. At times government gave some tax concession to them with in the FERA (Foreign ExchangeRegulation Act) and streamlined the licensing procedures. The purpose was to secure advanced, technical andindustrial know how. During the janata rule the policy was outright purchase of technical know-how skills andmachinery. They took two major decisions. Coco cola was asked to wind up their operations. Asked IBM toreduce their foreign equity to 40%. They did not agree, so asked to wind up MNC's operate in several sectorslike tobacco, toiletries beverages etc. Industrial Policy of 1991 accepted foreign investment essential formodernization technology up gradation and industrial development. Several concessions were given FERAregulations were liberalized and permitted to use their trademarks in the domestic market. Now it has becomea wide spread phenomena with USA the biggest among them. In the report of the International LabourOrganization (ILO), it is observed that “the essential of the MNCs lies in the fact that the managerialheadquarters are located in the home country, while the enterprise carries out operations in a number of othercountries (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 Philips. In the1950s and 1960s, following the emergence of the USA as the world’s dominant industrial power at the end ofthe 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 internationalbusiness expansion through foreign subsidiaries. The Japanese multinational expansion of the 1970s and1980swas characterized by global strategies commanded by home based headquarters and manufacturingfacilities. A number of companies worldwide are coming together by way of mergers and joint ventures inorder 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 steadilygetting its act together in India, after announcing recently that it was moving away from unprofitablebusinesses. The latest financial results of Gillette India, one of its two listed companies, had it reportingdouble-digit revenue growth for the three months ended March, after consecutive quarters of single-digitgrowth. Procter & Gamble Hygiene and Healthcare, the other listed company, reported double-digit revenuegrowth for a second quarter in a row. Its earlier single-digit sales growth was for the three months endedSeptember 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 growthfor 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 becomeprofitable. The results that India has delivered have contributed positively to the health of the parentcompany." In an analyst call last month, its global finance head, Jon Moeller, said the firm had made a choiceto de-prioritise several unprofitable lines of business which negatively impacted short-term revenue growthrates in India. "The strategic portion of our India business is growing at a high single-digit pace. Sales in theportions we're fixing or exiting have been down more than 30 per cent. This top line pain is worth it. We'remaking 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, whichincludes products such as Pantene and Head & Shoulders. Abneesh Roy, associate director at EdelweissFinancial Services, had said in a 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 coulddefocus on lower-end Tide (detergent) and Wella (hair care products)." The company has in the past fewquarters attempted to move away from lower priced stock-keeping units in detergents and cut shampoo pricesby 25 per cent to shore up domestic market share, analysts said. The firm, which crossed Rs 10,000 crore inturnover in financial year ended June 2015, is among the top three in most of its core categories. Thespokesperson said P&G would continue to focus on core brands and variants in India, in line with globalstrategy. Internationally, P&G is exiting 105 brands. These include Duracell batteries, which it sold toBerkshire Hathaway, and 43 beauty products which sold to New-York-based Coty Inc. last year.

GROWTH TREND OF MULTINATIONALS IN INDIA RECENT DEVELOPMENTThe object of this study is to find out the impact of the entry of multinational companies in Indian Market.This topic is of great importance, as the entry of Multinationals in India will have great effects on the Indianproducers as they have to make efforts to exist in this competitive environment. Most of the Indian consumerbelongs to the lower and lower middle class for mass consumption. They are many big enterprises in Indiawho are successfully marketing their products to the Indian masses. They will in due course of time face thechallenges that will be posed by the multinationals. The upper and middle classes are also consumers of costlygoods, which are essential for their comfort and luxury. The multinational will be targeting the consumer ofthe all classes.




Indian consumer segment is broadly segregated into urban and rural markets, and is attracting marketers fromacross the world. The sector comprises of a huge middle class, relatively large affluent class and a smalleconomically 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 thequarter ending September 2016. Further, in the discretionary spending category, 68 per cent respondents fromIndia indicated the next 12 months as being good to buy, thus ensuring once again that India leads the globaltop 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. Thegrowth in India’s consumer market would be primarily driven by a favourable population composition andincreasing disposable incomes. A recent study by the McKinsey Global Institute (MGI) suggests that if Indiacontinues 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 toUS$ 3.6 trillion by 2020. The maximum consumer spending is likely to occur in food, housing, consumerdurables, and transport and communication sectors. The report further stated that India's share of globalconsumption would expand more than twice to 5.8 per cent by 2020.

Market sizeThe growing purchasing power and rising influence of the social media have enabled Indian consumers tosplurge on good things. The Indian consumer sector has grown at an annual rate of 5.7 per cent betweenFY2005 to FY 2015. Annual growth in the Indian consumption market is estimated to be 6.7 per cent duringFY2015-20 and 7.1 per cent during FY2021-25.

The Indian fast-moving consumer goods (FMCG) companies have performed better than their multinationalpeers as the combined revenue of country's seven leading FMCG companies stood at US$ 11.1 billion in FY2015-16, 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 phonemarket globally, the number of smart phones is expected to grow strongly to over 650 million by 2019. Indiansmart phone shipments reached 103.6 million in 2015, thus crossing the 100 million mark, and becoming oneof the fastest growing smart phone markets in Asia Pacific region. Smartphone shipments rose to 30 million inJuly-September 2016 quarter, maintaining its healthy traction with 11 per cent YoY growth. It is estimatedthat smart phone sales in India will grow about 15 per cent to 125 million in 2017. 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, onthe back of growing aspirations and rising disposable income of middle class.

InvestmentsFollowing are some major investments and developments in the Indian consumer market sector. US-basedfood company Cargill Inc, aims to double its branded consumer business in India by 2020, by doubling itsretail reach to about 800,000 outlets. Yum! Brand, plans to open 100 Taco Bell outlets in India over the nextfive 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 plansof opening six more stores, taking its total store count in the country to 32 by the end of March 2017. RocheBobois Group, outlined plans of opening new stores in cities like Hyderabad, Chennai, Pune, Kolkata andAhmedabad, in order to make India one of its top five markets by 2021. Diageo, the world’s largest spiritmaker, has announced opening of a new business service centre called Diageo Business Services India (DBSI)in Bengaluru, which aims to increase its workforce to 1,000 from 100 currently. Amway, India’s largestcompany in the Rs 7,500 crore (US$ 1.12 billion) direct-selling market, plans to invest Rs 400 crore (US$ 60million) over the next five years to expand its product portfolio and open 50 ‘express’ stores in top 20 cities ofIndia, in addition to strengthening its e-commerce website.

BALANCED GROWTH AND LEADERSHIP VALUE CREATION IS TOP PRIORITYP&G is focused on four key areas of transformation to deliver balanced growth and leadership value Creation:

• Accelerating Top-Line Growth

• Improving Productivity and Cost Structure• Streamlining the Product Portfolio• Strengthening Organization and Culture




Furlenco, an online furniture rental company, has raised US$ 30 million in series B round of funding led byLight Box Ventures, Axis Capital and a number of high net-worth individuals, which will be used to expandits 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 Indianconsumer market by 2017 and invest GBP 154 million (US$ 190 million) over the next five years in areas ofretail infrastructure, marketing, promotion and taxes to the government.

Zefo, a Bengaluru-based refurbished goods marketplace, has raised Rs 40 crore (US$ 6 million) in a fundinground led by Sequoia India, with participation from Beenext and Helion Venture Partners, which will be usedto expand its team, invest in technology, and expand its presence in Mumbai and Delhi, which were recentadditions. Adidas India Private Limited, outlined plans of opening around 30-40 big flagship stores acrossDelhi, Mumbai and Bengaluru, by 2020.

Swiss watchmaker Montres Corum Sàrl, better known as Corum, has partnered with the luxury watch retailerEthos Watch Boutiques to sell Corum watches in India, in order to strengthen its presence in India byrebuilding its distribution network and boosting revenues.




AO Smith, a US based water technology and air purification solutions company, sees India as one of keymarkets and plans to grow at double-digit growth rate, having invested US$ 75 million so far. Crocs India PvtLtd, outlined plans of increasing its store count in India from 38 to 100 by the end of 2017, and increasing itsfocus on the casual footwear category to expand its consumer base and thereby boost its overall revenue.

Government InitiativesThe Government of India has allowed 100 per cent Foreign Direct Investment (FDI) in online retail of goodsand services through the automatic route, thereby providing clarity on the existing businesses of e-commercecompanies operating in India. With the demand for skilled labour growing among Indian industries, thegovernment plans to train 500 million people by 2022 and is also encouraging private players andentrepreneurs to invest in the venture. Many governments, corporate and educational organisations areworking towards providing training and education to create a skilled workforce. The Government of India hasdrafted a new Consumer Protection Bill with special emphasis on setting up an extensive mechanism to ensuresimple, 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 doublethe 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 theconsumer market industry.

Union Cabinet reforms like implementation of the Goods and Services Tax (GST) and Seventh PayCommission are expected to give a boost to consumer durable sector in India.

Procter and Gamble (P&G), Gillette India trends of Growth in India:Your Company’s positive performance results for the Financial Year 2015-16, against a backdrop ofchallenging market environment, are testament to our focus on winning with the consumer. As I share withyou, your Company's annual performance for the Financial Year 2015-16, I take pride in the fact that theCompany’s net sales went up by 4% versus last year, driven by Company’s focus on brand fundamentals andstrength of product portfolio. Profit After Tax (PAT) for the Financial Year went up by 35% behind focus onproductivity and cost optimization. As one of the world’s largest consumer products Company, we have botha responsibility and an opportunity to do the right thing and create change. This strategy has inspired anenduring CSR strategy supported by two pillars – P&G Shiksha and Timely Disaster Relief. While P&GShiksha provides children from underprivileged backgrounds with an access to a holistic education, P&G'sdisaster relief activities aim to rehabilitate and empower the victims of natural disasters by providing themwith daily essential commodities and safe drinking water. By the end of Financial Year 2015-16, P&GShiksha built and supported over 1,000 (+550 since last year) schools across the country that will impact thelives of over 1 million (+200,000 since last year) children. P&G, over the last year, continued its efforts toprovide timely aid and relief to families affected by natural disasters. P&G sent out relief aid to over 10,000families affected by the Tamil Nadu floods comprising of P&G products. Any company that wants to drivegrowth and create value in the long run needs to adopt a mindset of ‘winning’.Company’s positive performance results for the Financial Year 2015-16, against a backdrop of challengingmarket environment, are testament to our focus on winning with the consumer. Driven by the Company’sfocus on brand fundamentals and strength of product portfolio, net sales increased to 2,052 crores, up 4%versus last year. Your Company made strategic portfolio choices that have resulted in strong marginimprovement 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 hasbenefited 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

Corporate Social ResponsibilityThe only way to build a sustainable business is to improve lives At P&G, sustainability means making everyday better for people through how we innovate and how we act. As one of the world’s largest consumerproducts 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 growingour brands and operations responsibly to conserve resources and improve life in the communities we impactacross the world. This strategy has inspired an enduring CSR strategy supported by two pillars – P&G Shikshaand Timely Disaster Relief. While P&G Shiksha provides children from underprivileged backgrounds with anaccess to a holistic education, P&G's Timely Disaster Relief activities aim to rehabilitate and empower thevictims of natural disasters by providing them with daily essential commodities and safe drinking water.




Source: Annual Report Gillette India Limited 2015-16












GROWTH OF INDIAN ECONOMYIndia has become the sixth largest manufacturing country in the world, rising up from the previous ninthposition, and thus retaining its bright spot in the world economic landscape. Post the demonetizationannouncement, the pace of remonetisation has picked up, and it is expected that the effects of demonetisationwill 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 Indiaback 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 invalidatehigh-value currencies, which dampened the economy’s biggest growth drivers – consumption and investmentdemand. Recognising the strength of Indian economic fundamentals, the IMF expects the impact ofdemonetization to fade away gradually, as it pegs the 2017–18 growth at 7.2%, overtaking China again by agood 0.7 percentage points. The World Bank, however, is more optimistic and has projected a GDP growth of7% 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 rock-solid 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 andinvestment and more on consumption demand. The broad macroeconomic indicators, based on latest data, areas follows:

Inflation: The retail inflation stayed above the comfort zone of 5% till August 2016, but it started moderatingthereafter 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 previousyear’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 2016when it stood at $76.5 billion, as against $100.1 billion in the corresponding period of the previous year. Thisis on the back of a 7.4% decline in imports coupled with a meagre growth of 0.75% in exports during saidperiod. 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 duringApril 2016 to January 2017 against an average of ₹65.03 per US dollar during the same period in the previousyear.

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

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




i) Increasing flow of Goods and ServicesThe observation of the total foreign trade, the exports are increasing at a decreasing rate but the imports areincreasing at an increasing rate during the period of 1991-2012. India’s total trade increased from Rs. 91893crore in 1991-92 to Rs. 22205809 crore in 2015-16.

ii) Balance of Trade in ServicesServices trade surplus which increased steadily in this decade to reach US$53.9 billion in 2008-09, felldrastically in the global crisis year of 2009-10 to US$ 35.7 billion. This was caused by the collapse in exportsof non-software services, particularly business services, the slow growth of software services, and the rise inimport of non software services, particularly business and financial services. The low service trade surplussituation continued in the first half of 2010-11.

iii) Increasing Flow of CapitalIt is observed that with increase in number of foreign companies the amount of FDI also goes on increasingbut it is in many folds. In 1991 number of foreign companies was 489and FDI was $129 mn. In 2001 numberof foreign companies increased as 1141the amount of FDI was US $ 4031 Million that increased more thanseven times i.e. US $ 29029 Million and in 2012 number of foreign companies increased as 3191, the amountof FDI also increased as US $ 32952Million.

iv) Information and Technology7,941 technology transfer approvals sanctioned by the government during 1991 -2011. USA ranks number onein providing technology to India with 1750 approvals since 1991. The sector wise technology transfers out ofthe total technology transfer approvals. Electrical equipment including computer hardware and software sectormade highest technology transfers i.e.1255 technology transfer agreements concluded from the rest of theworld 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 ofoperation. They either do so directly or provide funds for this purpose to civil society organizations. This alsoimproves 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 theend-user. People have more access to the comforts of life with a large variety of choices. Another significantadvantage 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 ofdevelopment they are helpful in area of needed technology and global marketing. They care only to the needof 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 areincreasing the shareholding in Indian companies swallowing them. They transfer attractive and profitablebusiness to these newly started subsidiaries so a large number of Indian share holders get cheated. Summingup 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 economyis an integrated economy i.e. a world without borders, a world in which all goods and factors can betransported across different regions at negligible cost. Some industries spread their production process acrossmany regions searching for the ideal environment for each specific phase of production. The magnitude anddimensions of human activities are squarely rising. The concept like 'closed economy' and protectionistpolicies are being gradually replaced by 'market based global corporate economy’.Thus the most significant development in international economic scenario during the past two decades hasbeen spectacular rise in power and influence of giant global corporate. It may be said that the role of theglobal 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 asa separate family of the global economy. In the present international environment, though, it seen difficult tofollow a close door policy, yet it should not be an open policy as well. We have to be selective for allowingthe foreign investment and at the same time we must encourage the indigenous industry.

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Strategies and Their Link with International Human Resource Management’,IOSR Journal of Business andManagement (IOSRJBM) ISSN: 2278-487X

Volume 3, Issue 5 (Sep,-Oct. 2012), PP 28-37 www.iosrjournals.org Mithani D. M. (2002): International Economics, Himalaya Publishing House, Mumbai, p.405. Aswathappa K., (2006): ‘Essentials of Business Environment’, Himalaya Publishing House, Mumbai, p. 40. Gangrade K. D., (2005): ‘Gandhian Approach to Development and Social Work’, Concept Publishing Company,

New Delhi, p. 44. http://unctad.org/en/Docs/wir2009 overview_en.pdf. http://www.ips.org.pk/globalization/1007-mncs-and their-role-and-socioeconomic -impact -on-host-societies.html UNCTAD report 2007 S.A. Hamed Hosseini (2010): ‘Globalization and Capitalism’, Available on

http://globalalternatives.wordpress.com/2010/04/01/globalization-and-nation-state Murthy S. (1999): ‘Foreign Investment and Economic Growth through Multinational Corporation and their Multiple

Impact’ in Arya P. P. and Tandon B. B. ‘Multinational Vresus Swadeshi Today’ (ed), Deep and Deep PublicationPvt. Ltd., New Delhi, p. 113.

Government of India, Ministry of Corporate Affairs, 57th Annual Report on the Working & Administration of theCompanies Act, 1956, New Delhi, p.32, available onhttp://www.mca.gov.in/Ministry/pdf/57AR_English.pdf

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Multinational Companies and Their Effects on Indian Economy