You are on page 1of 46

ECONOMICS OF GLOBAL TRADE AND

FINANCE
A PROJECT REPORT

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD


OF THE M.COM DEGREE OF

MASTER IN COMMERCE
(MANAGEMENT)

SUBMITTED TO
UNIVERSITY OF MUMBAI,
LALA LAJPATRAI COLLEGE,MAHALAXMI,MUMBAI
SUBMITTED BY

NAME OF THE STUDENT:

UNIVERSITY ROLL NO:

RAMSHA SHAIKH

SUPERVISED BY

MARCH 2016

15160618

CERTIFICATE
I hereby certify that the work which is being presented in the M.Com. Internal Project Report
entitled Swot on Parle, in partial fulfillment of the requirements for the award of the Master
of Commerce in Management and submitted to the Lala Lajpatrai College of Commerce and
Economics,Mahalaxmi,Mumbai 400034 is an authentic record of my own work carried out
under the supervision of _________________. The matter presented in this Project Report has
not been submitted by me for the award of any other degree elsewhere.

Signature of Student:

Signature of Supervisor(s):

Internal Examiner:

External Examiner:

College Stamp

Principal

ACKNOWLEDGEMENT
I would like to place on record my deep sense of gratitude to professor ______________. Dept
of for his generous guidance,help and useful suggestions.
I express my sincere gratitude to professor_____________ or his stimulating guidance,
continuous encouragement and supervision throughout the course of present work.
I also wish to extend my thanks to professor______________ and other colleagues for
attending my seminars also for their insightful comments and constructive suggestions to
improve the quality of this project work.
I am extremely thankful to _______________ coordinator and Principal _____________for
providing me infrastructural facilities to work in, without which this work would not have been
possible.

Signature of Student:

CONTENT

CHAPTER 1
HISTORY AND EVALUTION OF MNCS
FIRST MNCS IN WORLD : DUTCH EAST INDIA COMPANY
East India Company, Dutch, 16021798, chartered by the States-General of the Netherlands to
expand trade and assure close relations between the government and its colonial enterprises in
Asia. The company was granted a monopoly on Dutch trade E of the Cape of Good Hope and
W of the Strait of Magellan. From its headquarters at Batavia (founded 1619) the company
subdued local rulers, drove the British and Portuguese from Indonesia, Malaya, and Ceylon (Sri
Lanka), and arrogated to itself the fabulous trade of the Spice Islands. A colony, established
(1652) in South Africa at the Cape of Good Hope, remained Dutch until conquered by Great
Britain in 1814. The company was dissolved when it became scandalously corrupt and nearly
insolvent in the late 18th cent., and its possessions became part of the Dutch colonial empire in
East Asia.
The history of the Dutch East India Company, founded in 1602 and declared bankrupt in 1799,
spans almost the whole of the seventeenth and eighteenth centuries. For much of this time it
was the worlds largest trading company, owning, at the height of its wealth and power, more
than half the worlds sea-going shipping with its characteristic ship, the fluyt, also being
produced for the merchant marines of other countries, including England. It was known
internationally

by

its

distinctive

VOC

monogram,

the

initials

standing

for

VerenigdeOstindischeCompagnie or simply the United East India Company.


FIRST MNCS IN INDIA: IBM (headquartered in Armonk, New
York, United States)
International Business Machines Corporation abbreviated IBM and nicknamed "Big Blue .It is
a Multinational computer technology and IT consulting corporation.
Its headquartered inArmonk, New York, United States
The company is one of the few information technologyinformation technology and companies
with acontinuous history dating back to the 19th century.
IBM manufactures and sells computer hardware andsoftware (with a focus on the latter), and
offersinfrastructure services, hosting service, and consultingservices in areas ranging from

mainframe computers toand technology.


IBM was rated the No. 1 company amongst all IT companies in India on 'Employee
Satisfaction with Training' in Dataquest Top Employer Survey 2003 - An indication of how
Training is an integral part of life at IBM. Besides equipping our employees with newer sets of
skills every day, IBM's Training & Learning programs reflect our core belief that our workforce
is primed continually to face challenges every day. Join us and find out how far you can go
with IBM
At IBM it is important to strike an optimum balance between work and play. So, while you
work among other extremely bright and talented individuals like yourself who share the same
desire and passion for what they do, you will also have a life along the way! IBM is committed
to creating a supportive work environment that allows the employee control over how, where
and when his/her work gets done. IBMers benefit from policies and programs supporting
work/life balance, including flexi-timing, working from home and mobility options.
FIRST INDIAN MNCS

: INFOSYS

These corporations originated early in the 20th century and expanded after World War II.A
Multinational Corporation developed new products in its native country and manufactured
them abroad.Almost all the earliest and largest multinational firms were either American,
Japanese, or West European
During the last three decades, many smaller corporations have also become multinational.Such
enterprises maintain that they create employment, create wealth, and improve technology in
countries.
Multinational business operation is not a new concept. The British east India company,
Hudsons bay corporation and Royal Africa companies are example of MNCs. The post second
world war period has however, witnessed a changing hand in colonialism and there emerged a
new thrusts for industrial and technological development as well as rise of the USA as the
largest industrial power.
. The Dutch East India Company was the first multinational corporation in the world and the
first company to issue stock It was also arguably the worlds first mega corporation possessing
quasi-governmental powers, including the ability to wage war, negotiate treaties, coin money,
and establish colonies. The first modern multinational corporation is generally thought to be the
East India Company.

RESEARCH METHODOLOGY
Research Methodology commonly refers to a search for knowledge. One can also define also
research as a scientific and systematic research for pertinent information a specific topic.
Research is an art of systematic investigation. Some people consider research as a movement, a
movement to the known to the unknown.
According to Clifford Woody: - Research comprises defining and redefining problems,
formulating hypothesis or suggested solutions, collecting, organizing and evaluating data,
making deductions mil reaching conclusion, and at last carefully testing the conclusion to
determine whether they fit the formulating hypothesis.
Marketing research is defined as a systematic gathering and analysis of the data concern with
an objective. The whole activity is divided into various parts and after compilation of that we
reach at certain findings, which enable us to marketing decision. It involves the diagnosis of
information needed and the selection of the relevant and inter-related variables.
Research design:
Exploratory research :- The research design used in this project is the exploratory type.
Exploratory type of research is used because the sources of information are relatively few and
the purpose is merely to find and to undertsand the possible actions. The exploratory study is
often used as an introductory phase of a larger study and result are used in developing specific
technique for larger study.

DATA SOURCES:
PRIMARY:
Primary sources of data are the data which needs the personal efforts of collect it and which are
not readily available. Primary source of data are the other type of source through which the data
was collected.
SECONDARY:
Secondary sources are the other important sources through which the data was collected. These
are the readily available sources of the data where one had need not put much effort to
collected, because it is already been collected and part in an elderly manner by some researcher,
experts and special.
The secondary sources helpful for the study were:
1) Text books were referred.
2) Internet was made use for the collection of the data
3) Newspapers were also referred.
4) Business magazines were referred.

CHAPTER 2
MULTINATIONAL CORPORATION

An MNC (Multinational Corporation) is a corporation that has its management headquarters in


one country, known as the home country, and operates in several other countries, known as host
countries.
As the name implies, a multinational corporation is a business concern with operations in more
than one country. These operations outside the company's home country may be linked to the
parent by merger, operated as subsidiaries, or have considerable autonomy. Multinational
corporations are sometimes perceived as large, utilitarian enterprises with little or no regard for
the social and economic well-being of the countries in which they operate, but the reality of
their situation is more complicated.
When a company operates in a home nation established its subsidiary inother nation it becomes
an MNC and there starts the process of globalization where in a local company serves the entire
worlds with itsproducts and services.India has experienced a dramatic increase in the presence
of Multinational Corporation having a tremendous expansion in the amount of foreign direct
investment inflows to the Indian economy. Internet tools like Google, Yahoo, MSN, E-Bay,
Skype, and Amazonmakeit easier for the MNCs to reach their potential customers in the
country
There are over 40,000 multinational corporations currently operating in the global economy, in
addition to approximately 250,000 overseas affiliates running cross-continental businesses. In
1995, the top 200 multinational corporations had combined sales of $7.1 trillion, which is
equivalent to 28.3 per cent of the world's gross domestic product. The top multinational
corporations are headquartered in the United States, Western Europe, and Japan; they have the
capacity to shape global trade, production, and financial transactions. Multinational
corporations are viewed by many as favouring their home operations when making difficult
economic decisions, but this tendency is declining as companies are forced to respond to
increasing global competition.

The modern multinational corporation is not necessarily headquartered in a wealthy nation.


Many countries that were recently classified as part of the developing world, including Brazil,
Taiwan, Kuwait, and Venezuela, are now home to large multinational concerns. The days of
corporate colonization seem to be nearing an end.
IBM computer and Pepsi-Cola from U.S.A., Siemens from Germany, Sony and Honda from
Japan Philips from Holland etc., are some of the MNCs operating at international levels.
Introduction Since 1991, India has experienced a dramatic increase in the presence of
Multinational Corporation (MNCs), and with it, a tremendous expansion in the amount of
FOREIGN DIRECT INVESTMENT inflows to the Indian economy.
Generally, any company or group that derives a quarter of its revenue from operations outside
of its home country is considered a multinational corporation.

MNC must have substantial direct investment in foreign countries

MNC must be engaged in the active management of these overseas assets

MNC is also involved in the management integration of operations located in different


countries

CHARACTERISTICS OF MNCS

Following are the some of the important features/characteristics of MNCs:


AREA OF OPERATION: - The MNCs operate in many countries with multiple
products on large scale. A MNC may operate both manufacturing and marketing
activities in a number of countries. Some MNCs operate in several countries, whereas,
others may operate in a few countries. Mostly MNCs from developed countries
dominate in the world markets.
ORIGIN:-The development of MNCs dates back to several centuries, but their real
growth started after the Second World War Majority of the MNCs are from developed
countries like U.S.A, Japan, UK, Germany and European countries. In recent years
MNCs from countries like Korea, Taiwan, India, China, etc. are operating in the world
markets.
COMPREHENSIVE TERM: - In general, the term MNC is a Comprehensive term and
includes international and transnational corporations. The term global corporation is
also included in the list of MNC.
PROFIT MOTIVE: - MNCs are profit oriented rather than social oriented. Such
corporations do not take much interest in the social welfare activities of the host
country.
MANAGEMENT: - The Parent company works like a holding company. The subsidiary
companies are to operate under control and guidance of parent company. The
subsidiaries functions as per the policies and directions of parent organisation.
MANUFACTURE AND MARKETING ACTIVITIES: - MNCs undertake both
Manufacturing and Marketing Activities and they are predominantly engaged in hi-tech
and consumer goods industries. Majority of the MNCs are engaged in pharmaceutical,
petrochemicals, engineering, consumer goods, etc.

QUALITY CONSCIOUSNESS: - MNCs are quality and cost conscious and managed
by professionals and experts. They have their own organisation culture and systems.
MNCs believe in the concept of total quality management.

BRANDING STRATEGIES OF MNCS IN INTERNATIONAL MARKETS:In todays


global marketplace, MNCs need to set up effective brandingstrategies in order to be
competitive. Depending on the structure of thecompany and the products offered,
MNCs can use different strategies.
Their main aim is to obtain the HIGHEST POSSIBLE PROFIT.
They invest LARGE SUMS OF MONEY
THEY AID LOCAL COMPANIES &attain their benefits
They operate in more than one country at the same tim
Big size
Huge intellectual capital
Operates in many countries
Large number of customer
.Large number of competitors
Structured way of decision making
OBJECTIVE OF MNC
To expand the business beyond the boundaries of the home country.
Minimize cost of production, especially labour cost.
Capture lucrative foreign market against international competitors.
Avail of competitive advantage internationally.
Achieve greater efficiency by producing in local market and then exporting the products.

MNCS STRUCTURE
Horizontally

integrated

multinational

corporations:

Horizontally

integrated

multinational corporations manage production establishments located in different


countries to produce the same or similar products. (example: McDonald's )
Vertically integrated multinational corporations:Vertically integrated multinational
corporations manage production establishment in certain country/countries to produce
products that serve as input to its production establishments in other country/countries.
(example: Adidas )

Diversified

multinational

corporations:

diversified multinational Corporations do not manage production establishments located


in different countries that are horizontally nor vertically nor straight, nor non-straight
integrated. (example: Hilton Hotels )

TYPES OF MULTINATIONAL CORPORATIONS

ETHNOCENTRIC: These are the type of MNCs which have strong orientation towards
home country. This means that home country people are considered as superior and
allocated all key posts.

POLYCENTRIC: Just opposite to Ethnocentric polycentric type of MNCs has strong


orientation towards host country where few key people are nationals and remaining are
from the host country.

REGIOCENTRIC AND GEOCENTRIC: These MNCs have their concentration in


whole world and they make selection for best employees whether they are from host
country or home country it does not matter.

ADVANTAGES OF MNCS TO THE HOST COUNTRY:

Transfer of technology, capital and entrepreneurship.


Increase in the investment level and thus, the income and employment in the host
Country.
Greater availability of products for local consumers.
Increase in exports and decrease in imports.

ADVANTAGES OF MNCS TO THE HOME COUNTRY:

Acquisition of raw materials from abroad.


Technology and management expertise acquired from competing in global markets.
Export of components and finished goods for assembly or distribution in foreign
markets.
Inflow of income from overseas profits, royalties and management contracts.

ROLE OF MNC

Multinational corporations (MNCs) are huge industrial organizations having a wide network of
branches and subsidiaries spread over a number of countries. The two main characteristics of
MNCs are their large size and the fact that their worldwide activities are centrally controlled by
the parent companies. Such a company may enter into joint venture with a company in another
country. There may be agreement among companies of different countries in respect of division
of production, market, etc.

These companies are to be found in almost all the advanced countries, with the USA perhaps
the biggest amongst them. Their operations extend beyond their own countries, and cover not
only the advanced countries but also the LDCs.
Many MNCs have annual sales volume in excess of the entire GNPs of the developing
countries in which they operate. MNCs have great impact on the development process of the
Underdeveloped countries.

MNC's plays an important role in boosting up Indian Economy. In support of this we can say,
MNC's bring foreign investors to India and hence helps in globalization of Indian Market.

Arguments for MNCs (The positive role:)

The MNCs play an important role in the economic development of underdeveloped countries.

Filling Savings Gap: The first important contribution of MNCs is its role in filling the
resource gap between targeted or desired investment and domestically mobilized
savings. For example, to achieve a 7% growth rate of national output if the required rate
of saving is 21% but if the savings that can be domestically mobilised is only 16% then
there is a saving gap of 5%. If the country can fill this gap with foreign direct

investments from the MNCs, it will be in a better position to achieve its target rate of
economic growth.

Filling Trade Gap: The second contribution relates to filling the foreign exchange or
trade gap. An inflow of foreign capital can reduce or even remove the deficit in the
balance of payments if the MNCs can generate a net positive flow of export earnings.

Filling Revenue Gap: The third important role of MNCs is filling the gap between
targeted governmental tax revenues and locally raised taxes. By taxing MNC profits,
LDC governments are able to mobilize public financial resources for development
projects.

Filling Management/Technological Gap: Fourthly, Multinationals not only provide


financial resources but they also supply a package of needed resources including
management experience, entrepreneurial abilities, and technological skills. These can be
transferred to their local counterparts by means of training programs and the process of
learning by doing.
Moreover, MNCs bring with them the most sophisticated technological knowledge about
production processes while transferring modern machinery and equipment to capital poor
LDCs. Such transfers of knowledge, skills, and technology are assumed to be both desirable
and productive for the recipient country.

Arguments Against MNCs(The negative role):

There are several arguments against MNCs which are discuss below.
Although MNCs provide capital, they may lower domestic savings and investment rates
by stifling competition through exclusive production agreements with the host
governments. MNCs often fail to reinvest much of their profits and also they may
inhibit the expansion of indigenous firms.

Although the initial impact of MNC investment is to improve the foreign exchange
position of the recipient nation, its long-run impact may reduce foreign exchange
earnings on both current and capital accounts. The current account may deteriorate as a
result of substantial importation of intermediate and capital goods while the capital
account may worsen because of the overseas repatriation of profits, interest, royalties,
etc.

While MNCs do contribute to public revenue in the form of corporate taxes, their
contribution is considerably less than it should be as a result of liberal tax concessions,
excessive investment allowances, subsidies and tariff protection provided by the host
government.

The management, entrepreneurial skills, technology, and overseas contacts provided by


the MNCs may have little impact on developing local skills and resources. In fact, the
development of these local skills may be inhibited by the MNCs by stifling the growth
of indigenous entrepreneurship as a result of the MNCs dominance of local markets.

MNCs impact on development is very uneven. In many situations MNC activities

reinforce dualistic economic structures and widen income inequalities. They tend to
promote the interests of some few modern-sector workers only. They also divert
resources away from the production of consumer goods by producing luxurious goods
demanded by the local elites.

CHAPTER 3
Top MNCs in India
The country has got many M. N. C.s operating here. Following are names of some of the
most famous multinational companies, who have their headquarters of operational
branches based in the nation:
IBM- IBM India Private Limited, a part of IBM has been operating from this
country since the year 1992. This global company is known for invention and
integration of software, hardware as well as services, which assist forward thinking
institutions, enterprises and people, who build a smart planet. The net income of
this company post completion of the financial year end of 2010 was $14.8 billion
with a net profit margin of 14.9 %. With innovative technology and solutions, this
company is making a constant progress in India. Present in more than 200 cities,
this company is making constant progress in global markets to maintain its leading
position.
Microsoft: A subsidiary, named as Microsoft Corporation India Private Limited, of
the U. S. (United States) based Microsoft Corporation, one of the software giants
has got their headquarter in New Delhi. Starting its operation in the country from
1990,

this

company

has

got

the

following

business

a. Microsoft Corporation India (Pvt.) Limited (Marketing Division)


b. Microsoft Global Services India

units:

c. Microsoft Global Technical Support Centre


d. Microsoft India Development Center
e. Microsoft IT
f. Microsoft Research India

The net income of Microsoft Corporation grew from $ 14, 569 million in 2009 to $ 18,
760 million in 2010. Working in close association with all the stakeholders including
the Government of India, the company is committed towards the development of the
Indian software as well as I. T. (Information Technology) industry.
Nokia Corporation: Nokia Corporation was started in the year 1865. Being one
of the leading mobile companies in India, their stylish product range includes
Normal mobile handsets , Smartphones, Touch screen phones, Dual sim
phones,Business phone.
The net sales of the company increased by 4 % in the last financial year with sales of EUR 42.4
billion as compared to 2009's EUR 41 billion. Over the past few years, this company in India
has been acquiring companies, which have got new and interesting competencies and
technologies so as to enhance their ability of creating the mobile world. Besides new
developments to fight against mineral conflicts, they are even to set up Bridge Centers in the
country for supporting re-employment. Their first onsite for the installation of renewable power
generation are already in place.
PepsiCo: PepsiCo. Inc. entered the Indian market with the name of PepsiCo
India from the year 1989. Within a short time span of 20 years, this company has
emerged as one of the fast growing as well as largest beverage and food
manufacturer. As per the annual report of the company in the last business year,
the net revenue of PepsiCo grew by 33 %. By the year 2020, this food
manufacturing company intends to triple their portfolio of enjoyable and
wholesome offerings. The expansion of their Good-For-You portfolio is believed
to be assisting the company in attaining the competitive advantage of the
growing packaged nutrition market in the world, which is presently valued at $
500 billion.

Ranbaxy Laboratories Limited: Ranbaxy Laboratories Limited, one of the


biggest pharmaceutical companies in India, started their business in the country
from the year 1961. The company made its public appearance in 1973 though.
Headquartered in this nation, this international, research based, integrated
pharmaceutical company is the producer of a huge range of affordable cum
quality medicines that are trusted by both patients and healthcare professionals
all over the world. In the business year 2010, the registered global sales of the
company was US $ 1, 868 Mn. Successful development of business forms the
key component of their trading strategy. Apart from overseas acquisitions, this
company is making a continuous endeavor to enter the new global markets,
which have got high potential. For this, they are offering value adding products
as well.
Reebok International Limited: This global brand is a famous name in the field
of sports as well as lifestyle products. Reebok International Limited, a
subsidiary of Adidas AG, is based in U. S. A. (United States of America) started
its operation in 1890s. During the last financial year, Adidas's currency
neutralized group sales increased by 9 %. Apart from their alliance with CrossFit
that is among the largest contemporary fitness movements, in the current year,
Reebok's announcement of its partnership with artist, designer and producer
Swizz Beatz reflects its long term future growth.
Sony: Sony India is a part of the renowned brand name Sony Corporation,
which started their business operation in the year 1946 in Japan. Established in
India in November 1994, this company has captured one of the leading positions
in the field of consumer electronics goods. By the end of the business year 2010
on 31st March, 2011, the company showed a remarkable increase in the share
related to numerous categories. Sony India is planning to invest around INR.
150 crore for the marketing of the activities related to ATL and BTL. As far as
Bravia TVs are concerned, they are looking forward to hold their market share
of 30 %. In between the last and the current financial year, the number of their
outlets in the country increased by 1, 000.
Tata Consultancy Services: Commonly known as T. C. S., this multinational
company is a famous name in the field of I. T. (Information Technology)
services, Business Process Outsourcing (B. P. O.) as well as business solutions.

This company is a subsidiary of the Tata Group. The first center for software
researching was established in the country in 1981 in the city of Pune. Tata
Consultancy earned a growth of 8.9 % during the latest quarter of this financial
year, which ended on 30th September, 2011. This renowned company is
presently looking forward to the 10 big deals that they have received besides the
Credit Union Australia's contract as well as Government of Karnataka's INR. 94
crore deal for a total period of 6 years. In this current business year, they are
about to employ 60, 000 people to meet their business requirement.
.Vodafone: Vodafone Group Plc is an international telecommunication company,
which has got it's headquarter based in London in the United Kingdom (U. K.).
Earlier known as Vodafone Essar and Hutchison Essar, Vodafone India is among
the largest operators of mobile networking in the country. The parent company
Hutchison started its business in the year 1992 along with the Max Group, which
was its business partner in India. Much later in 2011, Vodafone Group Plc
decided to buy out mobile operating business of Essar Group, its partner. The
turnover of the Vodafone Group Plc after the completion of the last financial
year grew to 44, 472 m from 41, 017 m that was the turnover of the business
year 2009.
Tata Motors Limited: The biggest automobile company in India, Tata Motors
Limited, is among the leading commercial vehicles manufacturer in the country.
They are one of the top 3 passenger vehicle manufacturers. Established in the
year 1945, this company, a part of the famous Tata Group, has got its
manufacturing units located in different parts of the nation. Some of their well
known products of the company are categorized in the following heads:

a. Commercial Vehicles
b. Defence Security Vehicles
c. Homeland Security Vehicles
d. Passenger Vehicles

e. Post completion of the financial year 2010 to 2011, the global sales of the company grew
by 24.2 % with sales crossing INR. 1 million.

WHAT IS THE FUTURE OF MNCS IN INDIA?


Current trends in the international marketplace favour the continued development of
multinational corporations. Countries worldwide are privatizing government-run industries, and
the development of regional trading partnerships such as the North American Free Trade
Agreement (a 1993 agreement between Canada, Mexico, and United States) and the European
Union have the overall effect of removing barriers to international trade. Privatization efforts
result in the availability of existing infrastructure for use by multinationals seeking to enter a
new market, while removal of international trade barriers is obviously a boon to multinational
operations.
Perhaps the greatest potential threat posed by multinational corporations would be their
continued success in a still underdeveloped world market. As the productive capacity of
multinationals increases, the buying power of people in much of the world remains relatively
unchanged;this could lead to the production of a worldwide glut of goods and services. Such a
glut, which has occurred periodically throughout the history of industrialized economies, can in
turn lead to wage and price deflation, contraction of corporate activities, and a rapid slowdown
in all phases of economic life. Such a possibility is purely hypothetical, however, and for the
foreseeable future the operations of multinational corporations worldwide are likely to continue
to expand.

PROFIT OF MNCS IN INDIA

It is too specify that the companies come and settle in India to earn profit. A company enlarges
its jurisdiction of work beyond its native place when they get a wide scope to earn a profit and
such is the case of the MNCs that have flourished here. More over India has wide market for
different and new goods and services due to the ever increasing population and the varying
consumer taste. The government FDI policies have somehow benefited them and drawn their
attention too. The restrictive policies that stopped the company's inflow are however withdrawn
and the country has shown much interest to bring in foreign investment here.
Besides the foreign directive policies the labour competitive market, market competition and
the macro-economic stability are some of the key factors that magnetize the foreign MNCs
here.

Following are the reasons why multinational companies consider India as a preferred
destination for business:
Huge market potential of the country

FDI attractiveness

Labour competitiveness

Macro-economic stability

MNC IN INDIA ARE ATTRACTED TOWARDS:

Indias large market potential

India presents a remarkable business opportunity by virtue of its sheer size and
growth

Labour competiveness

FDI attractiveness

GOVERNMENT SUPPORT:
Both revenue and capital expenditure on R&D are 100% deductible from taxable
income under the Income Tax Act.

A weighted tax deduction of 125% is allowed for sponsored research in approved


national laboratories and institutions of higher technical education.

A weighted tax deduction of 150% is allowed on R&D expenditure by companies in


government-approved in- house R&D centres in selected industries.

A company whose principal objective is research and development is exempt from


income tax for ten years from its inception.Accelerated depreciation is allowed for
investment in plant and machinery made on the basis of indigenous technology.

Customs and excise duty exemptions for capital equipments and consumables required
for R&D.

Excise duty exemption for three years on goods designed and developed by a wholly
owned Indian company and patented in any two countries out of: India, the United
States, Japan and any country of the European Union.

POLICIES THAT HELPED MNCs GROW IN INDIA


FDI Policy: Most sectors including manufacturing activities permitted 100% FDI
under automatic route (No prior approval required)

Industrial Licensing: Licensinglimited to only5 sectors (security, public health & safety
considerations)

Exchange Control: All investments are on repatriation basis.

Original investment,profits and dividend can be freely repatriated

Taxation: Companies incorporated in India treated as Indian companies for taxation

Convention on Avoidance of Double Taxation with 71 countries including Korea

WHY MNCS IN INDIA


There are a number of reasons why the multinational companies are coming down to India.
India has got a huge market. It has also got one of the fastest growing economies in the world.
Besides, the policy of the government towards FDI has also played a major role in attracting
the

multinational

companies

in

India.

For quite a long time, India had a restrictive policy in terms of foreign direct investment. As a
result, there was lesser number of companies that showed interest in investing in Indian market.
However, the scenario changed during the financial liberalization of the country, especially
after 1991. Government, nowadays, makes continuous efforts to attract foreign investments by
relaxing many of its policies. As a result, a number of multinational companies have shown
interest in Indian market.

Impact Of MNCs on Automobile industry


The present scenario is a highly transformed one. Multinational giants are vying with one other
to launch their models. Big names of the vehicle industry like the Korean giant, Hyundai,
General Motors, Mitsubishi etc. have already opened their account. In other vehicle segments
too, Volvo, Mercedes Benz, Audi etc. have carved out their niche. In the two-wheeler segment

besides the other major MNC brands made available to the Indian consumers.
As a result conducting business in the Automotive Industry has become more competitive and
sophisticated, which increases the demand for multi skilled personnel. Employment
opportunities are emerging with Manufacturers, Dealership Operations including Parts, Sales,
Service, Leasing & Financing, as well as in the fast developing Automotive Aftermarket sector.
On the other hand, Manufacturing in India has also come of age. The post liberation
economical scenario has resulted in all the big names such as General Motors, Ford, Toyota,
Honda, Suzuki, Mitsubishi, Mercedes-Benz, Fiat to come up with plants in India. The Indian
automotive giants like Telco, Mahindra, Ashok Leyland, Bajaj are revamping their production
strategies and launching new models designed and developed indigenously. This has opened up
numerous opportunities or employment in this sector for trained and skilled professionals who
are well versed in the latest manufacturing process.
Impact on the Indian Manufacturing sector:
The resurgence of India's manufacturing sector has been quite magical. Not only are profits
soaring, the sector is fast spreading its tentacles abroad as many Indian manufacturing firms
inch close to becoming true blue multinationals.
The Indian economy grew by 7.4 percent in the April-to-June quarter, FY2005, buoyed by
growth in manufacturing and services. Manufacturing grew 8 percent in the quarter, compared
with 7.6 percent in the previous quarter. The picture is about to brighten further.

According to a CII-McKinsey report, manufacturing exports from India are likely to


grow to $300 billion in 2015 from $48 billion in 2003. The country would then have a
3.5 per cent share of the world manufacturing trade.

To reach the $300 billion target, the industry has to clock a growth of 17 per cent every
year as against the 11 per cent rate at which it is growing at present.

Manufacturing exports from India grew 20 per cent in 2003 over the previous year.

Impact on Telecom Industry


One of the fastest growing sectors in the country, telecommunications has been growing at a

feverish pace in the past few years. The speed of growth can be gauged by the fact that in 2004,
ten years after private telephony was introduced in India, the mobile subscriber base had
crossed the number of fixed line connections.

While fixed lines touched 44 million at the end of 2004, the cellular user base registered
a 68 per cent growth to touch the 48-million mark. More than a third of these
subscribers were added during 2004.

The total telecom subscriber base, consisting of fixed as well as mobile users, registered
a growth of 31.42 per cent to touch 92.76 million at the end of 2004. The gross telecom
user base stood at 70.58 million at the end of 2003. (According to the Telecom
Regulatory Authority of India (TRAI), the growth in the mobile subscriber segment
picked up in December 2004 after remaining at around 1.5 million per month for the
previous two months.)

The year 2004 ended with the tele-density reaching an all-time high of 8.62, as
compared to 6.65 at the end of 2003, an increase of over 30 per cent.

In the mobile segment, additions consisted of 1.42 million GSM subscribers and 0.53
million CDMA subscribers. The total of 19.51 million mobile users in 2004 marks an
increase of 11.5 per cent over the 17.49 million additions made in 2003.

Even in fixed line, 2.67 million subscribers were added as compared to 2.15 million
new users during 2003, registering an increase of 24 per cent.

Impact on Research & Development


India has emerged as the hottest destination for multinational companies (MNCs) starting or
relocating their research & development (R&D) centres over the past two years. China comes
next, though it continues to be the leading destination for MNCs relocating their manufacturing
operations.
These are some of the underlying trends that emerge from the Ernst & Young Transfer Pricing
2005 global survey that polled 348 multinational parent companies and 128 subsidiary
corporations

in

22

countries.

Around 10% of the respondents reported either new or relocated R&D operations in the past

two years. Of this, 27% identified India as the leading relocation destination for R&D, followed
by China with 17%.
The best-known Indian R&D companies are in pharmaceuticals and biotech sectors. Companies
such as Ranbaxy, Dr Reddy's Laboratories, Sun Pharma and Biocon and Shanta Biotech are
attracting interest from companies in the US and Europe, which are seeking a strong platform
for development skills.

Impact On Food and Beverages Sector


New Delhi: India's booming tourism sector and its rapidly growing Westernstyle fast food joints offer unlimited opportunities for foreign food and
beverage exporters, as Indian food imports are likely to grow 6-7 per cent
over the next few years, says a study.

Eyeing the over 250 million-strong middle class, a US department study says the
prospects for investment in Indian markets could be gauged from the fact that total
Hotel, Restaurant and Institutional (HRI) service sector sales of F and B amounted to $
8 billion during 2003-04.
An upswing in the Indian hotel industry since 2003 following turnaround of the global tourism
industry, positive impact of 'Incredible India' tourism promotion campaign and the world's
increasing interest in India's rapidly growing economy are some of the main reasons cited for
growth.
Though Indian consumers, on an average, spend only 2.5 per cent of their food expenditure in
hotels and restaurants, the HRI service sector is expected to grow by 6-7 per cent over the next
few years.
"Though new, unorganised and untapped so far, the HRI service sector in India has vast
potential for growth as there are approximately 55,000 registered restaurants in the organised
sector and in the range of 1,00,000 to 5,00,000 in the unorganised sector, comprising
innumerable roadside eateries and tea/snack shops," the study noted.

GROWTH OF MNCS IN INDIA


NUMBER OF COMPANIES

Most of the largest companies, by revenue, are American or Japanese. In 1996, 162 of the 500
largest companies globally were from the United States and 126 from Japan. Only a few of the
largest companies are from developing countries. An exception is China, which has three
entries in the top 500 list (Fortune Magazine, Top 500 and Biggest revenues and increases in
revenues: http://www.fortune.com)
Measured by foreign assets, the distribution of the largest companies looks very much the
same. Most of the top 100 companies with largest foreign assets are from the United States,
Japan, the United Kingdom, France and Germany. In this list, Japanese companies are not as
prominent.
In 1995, the list of the top 100 transnational corporations (TNCs), measured by foreign assets,
included two companies from developing countries for the first time. These were Daewoo and
Venezuela (Oil Company). Total foreign assets of the top 100 TNCs in 1995 amounted to $1.7
trillion, while total foreign sales were $2 trillion, and total employment 5,800,000.
In 1996, the total revenues of the 500 largest companies globally were $11.4 trillion, total
profits were $404 billion, total assets were $33.3 trillion, and the total number of employees
was 35,517,692.

SECTOR WISE GROWTH: BANKING SECTOR


India's banking sector is booming at a great pace in spite of its relatively small size in
comparison of its counterparts in other leading economies. Indian banking sector has been
found lucrative by eminent players from the international world. For e.g.In India, Citibank and
Standard Chartered Bank has more than half of all credit card receivables and personal loans,
which has generated more than Rs. 200 crore of profit for both banks. In 2003, Oriental Bank
of Commerce was listed by Forbes magazine in its 'Global 200 Best Companies' list. In 1990s,
after a long gap of more than 20 years, the apex bank, Reserve Bank of India (RBI) has issued
licenses to 9 new private banks. In this, Times Bank got merged with the HDFC Bank. The RBI
also allowed Kotak Mahindra Finance Company to become a bank. These banks have shown
their edge over each others with the introduction of new products and technologies. Most of
the banks paid their focus on the retail sector and provide internet banking, phone banking and
mobile banking services to their customers and have cornered one of the largest segments of
the India's banking sector by targeting the India's growing middle income class. The Indian
banking sector has seen a proliferation of new services which has shown an improvement in
customer service.
Indian banking sector's growth to remain high
MUMBAI: Despite intense competition and high inflationary pressures, India's banking sector
will continue to show high growth owing to the country's strong economic expansion, credit
rating agency Standard & Poor's (S&P) said on Thursday.
"Growth in India's banking sector will remain high, bolstered by sound economic growth
prospects. Thegross non-performing loans (NPLs) for our portfolio of rated Indian banks
increased to 2.5 per cent as of March 31, 2010, from 2.2 per cent a year ago. This was in line
with our expectations," the ratings agency said.
It added, however, that the increase in NPLs was contained by the quick economic recovery,
modest leverage and low sectorial concentration in the banks' loan books. Besides this, the
banks had low exposure to sensitive sectors.

SERVICE SECTOR:
Service Sector in India today accounts for more than half of India's GDP.
According to data for the financial year2006-2007, the share of services, industry and
agriculture in Indias GDP is 55.1% 26.4% and 18.5% respectively
The sector, growing by 10 per cent annually, contributes 55.2 per cent to the GDP and a quarter
of total employment. It also contributes over one-third of country's total exports, besides
accounting for a higher share in foreign direct investment (FDI), the Survey noted.
As per the advance estimates for 2010-11, the two broad services categories -- trade, hotels,
transport and communication and financing, insurance, real estate and business services -- have
performed well with growth of 11 per cent and 10.6 per cent, respectively.
The survey said only community; social and personal services have registered a low growth of
5.7 per cent, thuscontributing to the slight deceleration in the growth of the sector.
Service sector and its growth
It mainly consists of following:
Trade, Hotels and Restaurants , Railways ,Other Transport & Storage, Communication (Post,
Telecom)

,Banking

,Insurance ,Dwellings, Real

Estate, Business Services

,Public

Administration, Defence ,Personal Services ,Community Services ETC.


Reasons for growth

1. Strong growth in foreign demand


2. Liberalisation
3. Sophistication in the information technology
4. Foreign Investment and Deregulation
5. (36% between 1992-2002)
6. Greater private sector participation
7. Increased private consumption of services ( 64 % of Indias GDP-Europe-58%,Japan-55%)

REASON FOR SLOW GROWTH

Some problems are shared by domestic corporations.

Taking advantage of limited liability.

Mining companies take out resources, distribute profits, leaving no money To clean up
mess.

Use of economic power to get favourable legislation.

Campaign contributions.

Distorted information (cigarette companies oil companies)

Massive cheating in hard-to-detect ways

Even in U.S.Exxon in Alaska and Alabama cases

Required extra-ordinarily sophisticated detection, beyond capability of most


developing countries

If this happens in U.S., what must be happening elsewhere?

powerto get special legislation and treatment that benefits themselves,


regulations, short circuiting environmental, health, worker regulations

Sometimes they seek, and get, special tax and tariff treatment; sometimes simply
persuading governments not to enforce existing regulations.

Sometimes special treatment is above boardnecessary to induce corporation to come;


but sometimes based on corruption.

Leverage economic power with political power.

CHAPTER 4
FDI POLICY AND ITS IMPACT ON MNCS

FOREIGN DIRECT INVESTMENT POLICY

MNCs are source of FDI, the movement of capital across national borders that grants the
investor control over an acquired asset.
FDI may comprise > 20% of global GDP.
In its recent foreign direct investment (FDI) policy, the Government of India had announced
additional methods for issue of shares for consideration other than cash, such as: (a) import of
capital goods/ machinery/ equipment (including second-hand machinery); (b) pre-operative/
pre-incorporation expenses (including payments of rent, etc.). The RBI has now implemented

these schemes by prescribing the detailed conditions on which this share issuance facility will
be available to Indian companies.)
Foreign direct investment (FDI) has become a key battleground for emerging markets and some
developed countries. Government-level policies are needed to enable FDI inflows and
maximize their returns for both investors and recipient countries.
Foreign direct investment (FDI) has become a key battleground for emerging markets and some
developed countries. Government-level policies are needed to enable FDI inflows and
maximize their returns for both investors and recipient countries.
Foreign direct investment (FDI) policies play a major role in the economic growth of
developing countries around the world. Attracting FDI inflows with conductive policies has
therefore become a key battleground in the emerging markets.
Developed countries also seek to bring in more FDI and use various policies and incentives to
attract overseas investors, particularly for capital-intensive industries and advanced technology.
The primary aim of these policies is to create a friendly business environment where foreign
investors feel comfortable with the legal and financial framework of the country, and have the
potential to reap profits from economically viable businesses. The prospect of new growth
opportunities and outsized profits encourages large capital inflows across a range of industry
and opportunity types.
Investors tend to look for predictable environments where they understand how decisionmaking processes work. Governments therefore are incentivized to build up a track record of
rational decision making. The business environment often requires work to remove onerous
regulations, reduce corruption and encourage transparency. Governments often also seek to
improve their domestic infrastructure to meet the operational needs of investors.
Providing fiscal incentives for attracting FDI is a subject of controversy analysts have argued
both in favour and against the idea. A general consensus is developing in favour of certain
incentives which have been proven historically to grow profits and therefore foreign
investments.
When policies are effective, significant FDI investments are injected into countries that help the
domestic economy to grow. Different countries and regions offer various kinds of fiscal
incentives, with a related variance in the level of FDI investments attracted.
Governments are increasingly setting up promotional agencies to foster foreign direct
investment. These agencies promote FDI-friendly policies, identify prospective sectors and
investors, and structure specific deals and incentives for major foreign investors such as multinational corporations (MNCs).

Global trade associations also play a major role in some of these investment activities. These
associations are tasked with creating a positive environment for foreign direct investors and
ensuring that both investors and recipient countries enjoy a favourable environment.
The formation of human capital is vital for the continued growth of FDI inflows. To enable the
most beneficial, technology and IP-driven FDI, highly skilled personnel are necessary.
Governments must therefore enact policies to provide training and skills upgrading to develop
their workforce and meet the employment needs of foreign investors.
The advantages of FDI are as follows.
1. It supplements the meagre domestic capital available for investment and helps set up
productive enterprises.
2. It creates employment opportunities in diverse industries.
3. It boosts domestic production as it generally comes in a package - money, technology etc.
4. It paves the way for internationalisation of markets with global standards and quality
assurance and performance based budgeting.
5. It pools resources productively - money, manpower, technology.
6. It creates more and new infrastructure.
7. For the home country it a good way to take advantage in a favourable foreign investment
climate (e.g. low tax regime).
8. For the host country FDI is a good way of improving the BoP position.

FDI is prohibited in only the following activities:


i. Retail Trading (except single brand product
retailing);
ii. Atomic Energy;
iii. Lottery Business;
iv. Gambling and Betting;
v. Business of chit fund;
Vi.Nidhi Company;
vii. Trading in Transferable Development Rights
(TDRs); and
viii. Activities/sectors not open to private sector

Investment.
GROWTH IN FDI
FDI equity inflows into India:
Thirteen-fold growth between 2003-04 and 2009-10

FDI inflows into India:


In terms of international practices of calculating FDI (i.e. by taking into account reinvested earnings and other capital), FDI inflows were nearly US $ 37.18 billion during
2009-10

Stable pace of inflows:


FDI inflows have somewhat flattened out over the course of the last three years
However, the pace of inflows has been stable This is including during 2009-10, at the
height of the global economic slowdown

This is despite a significant fall in global FDI inflows

Global FDI flows to India down 31% in 2010


However, China and other countries in South-East Asia continued to witness massive FDI
flows, UNCTAD said in its Global Investment Trends Monitor report issued on Tuesday.
UNCTAD says global FDI flows remained almost stagnant in 2010, increasing by 1 per cent to
$1.122 trillion. UNCTAD forecasts that global FDI flows are likely to remain between $1.3
trillion and $1.5 trillion in 2011. FDI inflows into India amounted to just $23.7 billion last year,
as against US$34.6 billion in 2009. In India, we have seen a sharp decline and we cant
explain why this has happened, said UNCTAD Investment & Enterprise Division Chief, James
X Zhan, who prepared the investment report.
We dont have the analysis, he said, maintaining that the decline in global FDI flows into
India was based on the figures compiled by the central bank.
However, in sharp contrast, China received FDI worth$274.6 billion last year, compared to

$233 billion in 2009. There is a structural change, Zhan said in regard to the higher FDI
flows to China, which is receiving huge investments on services and research and development
activities.
Many Western companies have shifted their research facilities to China and there is rapid
development in the hinterlands of the Communist country as well. The sharp increase in global
FDI flows to East and South-East Asian countries and Latin American nations in 2010 marked
the first time that developing countries outpaced rich nations in attracting foreign investments.
China, Hong Kong and other South-East Asian countries like Indonesia, Malaysia, Singapore
and Thailand were the main beneficiaries of the heightened FDI flows in the form of mergers
and acquisitions (M&As) and greenfield investment.
Part of the reason for the stagnant investment flows the world-over was largely due to the poor
performance of the developed economies, especially European countries, which were the
worst-hit by the global financial turmoil. The United States, which was the epicentre of the
global economic meltdown in 2008, is gradually recovering from the crisis, with FDI flows
increasing by 40 per cent last year to $186.1 billion from $129.9 billion in 2009.
The quarterly fluctuations during 2010 indicate that the worldwide FDI recovery is still
hesitant, said the report.
Several risk factors such as the slow global economic recovery, investment protectionism,
rising sovereign debt and continued volatility in the currency markets are likely to slow down
the pace of foreign direct investment across the globe in 2011, it said.

FDI Approvals in 2007


The FDI Approvals in 2007 resulted in stupendous rise of the Indian Services, Computer
Software & Hardware and Telecommunication sectors. The cumulative amount of Foreign
Direct Investment in India during the period from April 2007 to October 2007 was Rs 269,786
Crores.
This resulted in significant growth in areas like industrial production, agriculture, food grain
production, imports, exports and wholesale price indexes, which further fuelled growth,
productivity and employment in India.
The main countries that contributed to the inflow of FDI in India during April 2007 to
October 2007 were -

Mauritius ,USA ,UK ,Netherlands ,Singapore ,Japan ,Germany ,France , Switzerland,


Cyprus ,
The main sectors which contributed to the bulk of the FDI inflow in India during April
2007 to October 2007 were

Services sector - including financial and non-financial sector


Computer Software and Hardware
Telecommunication - including radio paging, cellular mobile and basic telephony
Automobile industry
Housing and real estate
Power
Chemicals - other than fertilizers
Metallurgical industries
Drug and pharmaceuticals
Share of top investing countries FDI equity inflow

SECTORS ATTRACTING HIGHEST FDI EQUITY INFLOW

RAN

SECTOR

Cumulative

PERCENTAGE

inflows(aug

OF

ust

1991- INFLOWS (RS)

march2010)
amount

in

Rs.crore(US
$
1

SERVICES
(financial

financial)
Computer

IN

MILLION)
SECTOR 101,019
&
software

22(%)

non- (22,687)
& 42,259

TOTAL

9(%)

hardware
3

(9,529)

TELECOMMUNICATIO 39,179

8(%)

NS (radio paging, cellular (8,600)


mobile, basic telephone
4
5

services)
Housing & real estate
Construction

34,348

7(%)

(7,701)
activities 30,557

7(%)

(including

roads& (6,945)

highways)
Power

20,006

4(%)

Automobile industry

(4,428)
19,566

4(%)

Metallurgical industries

(4,322)
12,990

3(%)

Petroleum & natural gas

(3,032)
11,261

2(%)

10

Chemicals(other

(2,612)
than 10,567

2(%)

fertilizers)
Total FDI inflow

(2,343)
2,32,014

Share of top 7 investing Countries: FDI equity inflows


(Percentage to total inflows - in terms of US$)

Why Indian youth prefer MNC'S than domestic companies:


Many of Indian youth's prefer MNC's Because of Saturday and Sunday Off .One of the reason
is the fast work, promotion according to growth, no ego between employees everyone sharing
equal platform and no attitude of sluggish work. Above all is the better packages being offered
and chances of going abroad.
There are various opportunities provided in MNC's like cross functional responsibilities, etc.
which is definitely missing in Indian companies hence work become monotonous and people
loose interest....
Secondly, MNC's try to make work culture employee friendly and help people to get a break
from there usual hectic schedule like organising cultural events.

INDIA VS CHINA
For investors, India is less risky than China
NEW DELHI : India continues to be less risky than China as a business destination, according
to a corporate study. India has been ranked 10th among 29 emerging markets in the latest
country risk analysis by Economic Intelligence Unit (EIU), an information service arm of the
Economist group.
With a score of 39 out of 100 in the risk scale, India has got 'B' risk rating and has outranked
China (41), Saudi Arabia (41), South Africa (45), Mexico (45), Brazil (48) and Egypt (49), who
have got 'C' rating.
However, Singapore (11, A rating), Hong Kong (21) continue to be the safest place for foreign
investment, followed by Taiwan (25), Israel, Hungary and Poland (37), who have qualified for
'B' rating. Not surprisingly, Iraq is the most dangerous country to do business, with a score of
91 out of 100, followed by Argentina (76).
A low risk rating is an important indicator of a country's global credit rating and the willingness
of foreign investors to invest in a country. Industry representatives said India has an
opportunity to gain from China 's slowdown.
Experts said country risk report comes in handy as a decision making tool for MNCs to enter or
expand in new markets.
EIU country risk rankings combine measures of political risk (like threat of war) and economic
risk (like size of fiscal deficits). They also include measures that affect a country's liquidity and
solvency (debt structure and forex reserves). Some of the operational factors that are considered
in determining country risk include security, political stability, government effectiveness, legal
& regulatory framework, macroeconomic conditions, financial & tax policy, labour market and
infrastructure. EIU reviews the risk ratings of over 100 emerging markets on a monthly basis.
Rapid growth, highly skilled labour and opportunities in outsourcing boosted India 's ratings.
While change in government brings no decline in risk for India , EIU says that Manmohan

Singh-led coalition must support reforms to sustain current ranking.


" India is watched closely by overseas investors on whether reforms will continue in the Left
supported government. There is little awareness about economic policies adopted by Left in
West Bengal ," says Amit Mitra, secretary general, Ficci. He said FDI investment will gather
momentum. " India is as safe as what it was and change in government has not changed the
situation," says N Srinivasan , DG-designate, CII. "Indian industry is upbeat and full of selfbelief."
Former RBI governor Bimal Jalan is confident that the country can handle any economic crisis.
Compared to China , India has become marginally safer in 2004. This perception could be
partly attributed to the strong external sector performance and reduced border-tension that India
experienced a year back.
EIU says that India is poised to grow at 8.3% in 2003-04 (April-March) and will grow at 7.3%
in 2004-05 owing to a "smaller harvest and hence less robust growth in personal incomes".
It also predicted a slowdown in China . " China 's GDP is likely to grow by 9.4% this year and
by 8.1% in 2005, with the slowdown being led by an easing of investment growth," projects
EIU. India has an edge over other global competitors in outsourcing opportunities, R&D. China
has scored over every country in cheap labour.
Despite slowdown, China will continue to be among top emerging markets for FDI, but India is
also becoming very attractive to global investors. EIU has projected FDI flows to India to touch
$13 billion in 2008 from $5 billion in 2003. However, China is forecast to receive $58 billion in
FDI this year. " India 's performance as one of the most attractive destinations for FDI is based
on several criteria, considering Indian authorities' commitment to attract more FDI is yet to be
fully matched by more investment-friendly policies," says EIU.
CII says effective communication is key to reduce India 's risk further, saying, "The biggest
challenge is spreading the right message to the global investing community." Jalan pointed out
the need to reduce fiscal deficit.

CHAPTER 5
CONCLUSION
They serve the customers and the institution best and therefore chemistry between country and
foreign MNCS has fruitful results .FDI attractiveness, labour competitiveness. Huge market
potential of the country. Policies such as FDI, Industrial licencing, taxation, exchange control
has helped MNCS to grow .there is a growth of MNCS in India because of huge market and
fast growing economies in world has played important role.
Due these MNCS competition increase and more employment opportunities are available &
there will be reduction in reasonal disparities
To conclude, we would opine that MNCS having a wide ambit is enviable to us, as to the fact
that, there exists lots of job opportunity paves a path for the increase in national income.
And also to create a better society, with better standard of living,and it increases labour
productivity , decrease in unemployment, and also increases the net national income of the
country. This will help the government and this will lead to increase in the export and imports
in the country.
Gives advantages to Domestic Companies throughpurchasing of raw material &resources.New
company having network to expand their business.
The present scenario is a highly transformed one. Multinational giants are vying with one other
to launch their models. Big names of the vehicle industry like the Korean giant, Hyundai,
general motors, Mitsubishi etc. Have already opened their account. In other vehicle segments
too, Volvo, Mercedes Benz, and Audi etc. Have carved out their niche.
One of the fastest growing sectors in the country, telecommunications has been growing at a
feverish pace in the past few years. The speed of growth can be judged by the fact that in 2004,
ten years after private telephony was introduced in India, the mobile subscriber base had
crossed the number of fixed line connections.

REFERENCE