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According To ILO Report (I.e. International Labour Organisation) "The Essential Nature of
According To ILO Report (I.e. International Labour Organisation) "The Essential Nature of
INTRODUCTION
Generally, any company or group that derives a quarter of its revenue from operations outside
of its home country is considered a multinational corporation.
First MNC was Dutch East India Co (1602), granted monopoly in colonial trade. Today, UN
estimates about 62,000 MNCs with 900,000 affiliates.MNC’s have existed since 1602, in
which year the first MNC, the Dutch East India Company, was established.
Germany, Belgium and Finland that have made a strong footing in India too. They are well
flourishing and earning their share of maximum profit too.
According to ILO report (i.e. International Labour Organisation) “The essential nature of
the multinational enterprises lies in the fact that its managerial headquarters are located in one
country, while the enterprise carries out operations in number of other countries’.
MNCS will have a demand for many services such as meals, transport, raw materials,
maintenance services that will be provided by domestic businesses, indirectly increasing
employment. Wages should increase as MNC’S will want the best people that the country has
to offer.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
Wages may be lower on international standards but should be higher than the local standard,
as logically the business will pay its workers more in order to motivate them. • Often MNC’S
are criticised for their wage policies but recent research and statistics prove this wrong.
(2) A global, centralized corporation that acquires cost advantage through centralized
production wherever cheaper resources are available,
(3) AN international company that builds on the parent corporation's technology or R&D,
(4) A transnational enterprise that combines the previous three approaches. According to UN
data, some 35,000 companies have direct investment in foreign countries, and the largest 100
of them control about 40 per cent of world trade.
Foreign involvement
export via agent or distributor
export through sales rep or subsidiary
Local packaging or assembly
FDI
License
Time
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
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 Amazon makeit 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.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
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.
This paper will analyse the effect with this change has had on Indian entrepreneur. The
overall conclusion reached is that the increased presence of MNCs has had a positive impact
on India entrepreneur. However, India entrepreneur has not even come close to reaching its
potential, and thus, much more change needs to occur.
Country of Origin:
Dell – USA
Hitachi – Japan
HSBC – UK
LG – South Korea
Nestle – Switzerland
Sony – Japan
Virgin – UK
Vodafone – UK
Nokia - Finland
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CHARACTERISTICS OF MNC’S
2. 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.
4. 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.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
12. They operate in more than one country at the same time
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
OBJECTIVE
MNC’S STRUCTURE
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
2. Increase in the investment level and thus, the income and employment in the host
Country.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
1. 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.
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COST OF CAPITAL
A firm’s capital consists of equity (retained earnings and funds obtained by issuing stock) and
debt (borrowed funds). The cost of equity reflects an opportunity cost, while the cost of debt
is reflected in interest expenses. Firms want a capital structure that will minimize their cost of
capital and hence the required rate of return on projects.
The cost of capital for MNCs may differ from that for domestic firms because of the
following differences.
1. Size of Firm: Because of their size, MNCs are often given preferential treatment by
creditors. They can usually achieve smaller per unit flotation costs too.
3. International Diversification: MNCs may have more stable cash inflows due to
international diversification, such that their probability of bankruptcy may be lower.
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Example: The coca cola recent annual report stated “Our global presence and strong capital
position afford us easy access to key financial markets around the world, enabling us to raise
funds with a low effective cost. This posture, coupled with the aggressive management of our
mix of short-term and long-term debt, results in a lower overall cost of borrowing.”
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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:
2. FDI attractiveness
3. Labour competitiveness
4. Macro-economic stability
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East India Company, Dutch, 1602–1798, 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 world’s largest trading company, owning, at the height of its wealth and
power, more than half the world’s 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
‘Verenigde OstindischeCompagnie’ – or simply the United East India Company.
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International Business Machines Corporation abbreviated IBM and nicknamed "Big Blue” .It
is a Multinational computer technology and IT consulting corporation.
It’s 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.
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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,
Hudson’s 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 world’s 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. Many corporations have offices, branches or
manufacturing plants in different countries from where their original and main headquarters
is located.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of
India Limited. As the Company's ownership progressively Indianised, the name of the
Company was changed from Imperial Tobacco Company of India Limited to India Tobacco
Company Limited in 1970 and then to I.T.C. Limited in 1974. In recognition of the
Company's multi-business portfolio encompassing a wide range of businesses - Cigarettes &
Tobacco, Hotels, Information Technology, Packaging, Paperboards & Specialty Papers, Agri-
business, Foods, Lifestyle Retailing, Education & Stationery and Personal Care - the full
stops in the Company's name were removed effective September 18, 2001. The Company
now stands rechristened 'ITC Limited'.ITC's Packaging & Printing Business was set up in
1925 as a strategic backward integration for ITC's Cigarettes business. It is today India's most
sophisticated packaging house.
ITC is a board-managed professional company, committed to creating enduring value for the
shareholder and for the nation. It has a rich organisational culture rooted in its core values of
respect for people and belief in empowerment. Its philosophy of all-round value creation is
backed by strong corporate governance policies and systems
The Company’s beginnings were humble. A leased office on Radha Bazar Lane, Kolkata,
was the centre of the Company's existence. The Company celebrated its 16th birthday on
August 24, 1926, by purchasing the plot of land situated at 37, Chowringhee, (now renamed
J.L. Nehru Road) Kolkata, for the sum of Rs 310,000. This decision of the Company was
historic in more ways than one. It was to mark the beginning of a long and eventful journey
into India's future. The Company's headquarter building, 'Virginia House', which came up on
that plot of land two years later, would go on to become one of Kolkata's most venerated
landmarks.
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1. Export stage
Licensing
Licensing is usually first experience (because it is easy)
Problem: the mother firm cannot exercise any managerial control over the licensee (it
is independent)
The licensee may transfer industrial secrets to another independent firm, thereby
creating a rival.
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Direct Investment
It requires the decision of top management because it is a critical step.
3. Multinational Stage
The company becomes a multinational enterprise when it begins to plan, organize and
coordinate production, marketing, R& D, financing, and staffing. For each of these
operations, the firm must find the best location.
Rule of Thumb
A company whose foreign sales are 25% or more of total sales. This ratio is high for small
countries, but low for large countries, e.g. Nestle (98%: Dutch), Phillips (94%: Swiss).
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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.
India presents a remarkable business opportunity by virtue of its sheer size and growth
Labour competiveness
FDI attractiveness
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GOVERNMENT SUPPORT:
Both revenue and capital expenditure on R&D are 100% deductible from taxable
income under the Income Tax Act.
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.
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FDI Policy: Most sectors including manufacturing activities permitted 100% FDI
under automatic route (No prior approval required)
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.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
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)
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
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. The top ten companies accounted for 11.7% of the total revenues of the top
500, 15% of profits, and 13.6% of employment, according to Fortune Magazine.
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America was home to 31 of the 50 most profitable firms, and seven of the top ten. The most
profitable, however, was Shell (the Netherlands) – with profits of $8.9 billion. Shell's profits
increased by 28.7% over 1995.
In 1996, the top 500 companies did not get bigger, they got richer. Their profits increased by
25.1%, while revenues increased only by 0.5%, assets by 3.5%, and the number of employees
by 1.1%.
Only in Western Europe and United States largest companies are top
MNCs
Most of the largest American and European companies in terms of revenues are also the
largest in terms of foreign assets. The largest American companies, by revenue, are GM, Ford
and Exxon. By foreign assets, the largest American companies are Ford, GE, Exxon and GM
(data of the United Nations Conference on Trade and Development, UNCTAD).
Shell, which is the only European company among the ten largest by revenues, also had the
largest foreign assets ($79.7 billion) in 1995 (Fortune Magazine and UNCTAD).Compared to
their revenues; large Japanese companies have fairly modest foreign assets. For example,
Mitsui had foreign assets of $16.6 billion, Itochu $15.1 billion, Marubeni $13.4 billion,
Sumitomo $12.0 billion, and Toyota $36.0 billion in 1995 (UNCTAD).
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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 other’s 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.
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.
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Indian banking sector has undergone major changes and reforms during economic reforms.
Though it was a part of overall economic reforms, it has changed the very functioning of
Indian banks. This reform have not only influenced the productivity and efficiency of many
of the Indian Banks, but has left everlasting footprints on the working of the banking sector in
India.
1. Reduced CRR and SLR: The Cash Reserve Ratio (CRR) and Statutory
Liquidity Ratio (SLR) are gradually reduced during the economic reforms period in
India. By Law in India the CRR remains between 3-15% of the Net Demand and Time
Liabilities. It is reduced from the earlier high level of 15% plus incremental CRR of
10% to current 4% level. Similarly, the SLR Is also reduced from early 38.5% to
current minimum of 25% level. This has left more loanable funds with commercial
banks, solving the liquidity problem.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
With these reforms, Indian banks especially the public sector banks have proved that they are
no longer inefficient compared with their foreign counterparts as far as productivity is
concerned.
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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 India’s 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.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
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.
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COUNTRY WISE
120
100
80
INDIA
60 RUSSIA
BREZIL
40 CHINA
20
0
2005 2006 2007 2008
US
United States is India's second largest source of FDI, second largest trade partner after EU
and the largest services export destination. There is significant potential for India and the US
to further strengthen their economic ties, by effectively leveraging India’s inherent
advantages.
JAPAN:
India is certainly more friendly with Japan. There is a CEPA (comprehensive economic
partnership agreement) signed for free trade and there are also plans to celebrate India and
Japan's 60 years of partnership.
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As Asian MNCs grow in size, their need for executive talent, and their ability to pay for that
talent, will rise proportionately, if not faster than their Western counterparts. Yet, Asia’s
emerging MNCs often can be at a disadvantage when recruiting top talent, despite their
increasing need for such talent.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
This is the top 10 as published in July 2011. It is based on the companies' fiscal
year ended on or before 31 March 2011
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
Sales
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
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Arguments for MNCs (The positive role:) The MNCs play an important role
in the economic development of underdeveloped countries.
1. 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.
2.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.
3. 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.
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5.Other Beneficial Roles: The MNCs also bring several other benefits to the host
country.
(a)The domestic labour may benefit in the form of higher real wages.
(b) The consumers benefits by way of lower prices and better quality products.
(c) Investments by MNCs will also induce more domestic investment. For example, ancillary
units can be set up to ‘feed’ the main industries of the MNCs
(d) MNCs expenditures on research and development (R&D), although limited is bound to
benefit the host country.
Apart from these there are indirect gains through the realization of external economies.
1. 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.
2. 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.
3. 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.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
4. 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.
7. The behaviour pattern of MNCs reveals that they do not engage in R & D activities in
underdeveloped countries. However, these LDCs have to bear the bulk of their costs.
8. MNCs often use their economic power to influence government policies in directions
unfavourable to development. The host government has to provide them special economic
and political concessions in the form of excessive protection, lower tax, subsidized inputs,
cheap provision of factory sites. As a result, the private profits of MNCs may exceed social
benefits.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
Sometimes they seek, and get, special tax and tariff treatment; sometimes simply
persuading governments not to enforce existing regulations
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
The cost of running R&D Centers in India has continued to decline over the last two years.
R&D Centers of MNCs in India have generated significant cost savings for their headquarters
because of the lower operating costs over the years.
According to a study titled ‘R&D Operations Cost 2010 - The Need to Look Beyond Cost
Control’ by the management consulting firm Zinnov Management Consulting, R&D centers
in India have helped parent organizations save a total of $40 billion in the last three years.
Currently, the cost of running R&D centers in India stands at ` 18.2 lakh per person per year.
It reveals that the cost has declined by 0.9 per cent in Rupee terms, 4 per cent in U.S. Dollar
terms, and 3.3 per cent in Euro terms in FY 2010, indicating signs of continued cost
optimization due to the constrained economic environment. The decline was primarily driven
by strict budgetary constraints of R&D centers of global companies in the form of minimal or
no salary increments, focus on variable pay, freeze on hiring, and cost optimization across
infrastructure, travel, and communication.
Bringing into perspective a comparative analysis of cities, the study says that the Bangalore-
based companies incur higher cost as compared to the other cities.
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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.
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Investors tend to look for predictable environments where they understand how decision-
making 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.
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.
1. It supplements the meagre domestic capital available for investment and helps set up
productive enterprises.
42
GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
4. It paves the way for internationalisation of markets with global standards and quality
assurance and performance based budgeting.
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.
retailing);
Vi.Nidhi Company;
(TDRs); and
Investment.
43
GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
GROWTH IN FDI
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
can’t explain why this has happened,” said UNCTAD Investment & Enterprise Division
Chief, James X Zhan, who prepared the investment report.
“We don’t 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.
44
GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
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.
45
GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
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 -
The main sectors which contributed to the bulk of the FDI inflow in India
during April 2007 to October 2007 were -
46
GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
The main Indian states that attracted the bulk of the FDI inflow in India
during April 2007 to October 2007 were -
Maharashtra, Delhi,Karnataka, Tamil Nadu, Andhra Pradesh, West Bengal, Chandigarh, Goa,
Madhya Pradesh, Kerala, Orissa, Rajasthan, Utter Pradesh, Assam, Bihar
The FDI Approvals in 2007 and its effects on the economy of India are as
follows -
FDI - India envisage of attracting $10 billion of foreign direct investment (FDI) this
year as inflows have nearly doubled to US$ 4.4 billion.
The mining and quarrying sector has registered a growth of 4% till October 2007.
Telecommunication sector with inflows of US$ 405 million has registered the
maximum growth of 950%.
The automotive industry achieved a growth rate of over 20% till October 2007.
47
GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
The biotechnology industry registered more than 40% growth till October 2007.
The US$ 47 billion Indian textile industry is expected to grow to US$ 115 billion by
the year 2012.
The US$6.4 billion Indian retail industry is expected to grow over 20% annually to
US$ 23 billion by 2010.
The robust pharmaceutical market in India ranks 4th worldwide and is expected to
cross business worth Rs 100,000 crores in formulations and bulk drug production by
2010.
Corporate India has recorded its highest rise in salaries at 22% till October 2007.
The Invisibles Account - remained positive and financed 2/3 of the trade deficit.
48
GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
NEW DELHI: Foreign Direct Investment increased marginally to $4.8 billion in 2001-02
from $4.5 billion in the previous fiscal despite the global recession following the September
11 terrorist attacks in the US.
Total FDI inflow last fiscal was $4.826 billion, which works out to Ds 22,168 core, as per the
latest data compiled by the Department of Industrial Policy and Promotion.
However, inflows declined by over 19 per cent in April this year at $221.8 million against
$275.1 million in the same month a year earlier.
Total FDI inflows including ADRs/GDRs and pending advance in April was marginally
lower at Rs 1064.77 crore as against Rs 1238 crore in April 2001.
During the fiscal year under review, telecommunication sector attracted the highest FDI
inflow at $867.39 million, accounting for over 17 per cent of total FDI.
Power, oil and refinery sector attracted the second highest FDI amount at $633.09 million,
accounting for 13.58 per cent of the total FDI, followed by the electrical equipment sector a
distant third with $435.27 million, translating to nine per cent of the total FDI.
The transportation sector attracted FDI inflows of $189.66 million accounting for 3.86 per
cent of the total while service sector garnered $157.78 million accounting for 3.24 per cent of
the total inflows.
49
GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
NEW DELHI: India's foreign direct investment inflows registered an impressive growth of
87 per cent at $501 million (net of ADRs/GDRs) in May against $268 million in the same
period last year.
As per latest data compiled by the industry ministry, FDI inflows continue to post impressive
growth in the current calendar year with cumulative FDI inflows during January-may
registering a growth of 60 per cent at $1.89 billion as compared to $1.18 billion in the
corresponding period a year earlier.
The impressive growth in FDI has been achieved at a time when there has been a steep
decline in the global FDI flows.
A sector-wise break-up reveals that telecommunications attracted the highest FDI approvals
in the month of May at 195.6 million dollars cornering 41.51 per cent share of the total FDI
approval in the month.
Service sector including both financial and non-financial services attracted $114.1 million
accounting for a share of 24.22 per cent while fuels attracted the third highest FDI approvals
with $47.8 million accounting for a share of 10.14 per cent.
Himachal Pradesh with $168.8 million accounting for a share of 35.83 per cent received the
highest number of FDI approvals during May. Delhi, Maharashtra, Gujarat and Goa were the
other states in the top five.
50
GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
MUMBAI: The Indian economy could well be on its way out of the woods if the money
pumped into the country by foreigners is anything to go by.
For the first time in more than one year, foreign direct investment (FDI) crossed the $3-
billion mark on a monthly basis. Total FDI inflows amounted to $3,476 million in July, up
55% from $2,247 million a year ago, latest data from the RBI monthly bulletin released on
Thursday show.
More heartening though is the fact that cumulative inflows from April-July , despite being
lower at $10.5 billion compared with $12.3 billion in the year-ago period, are marginally
higher than inflows through the portfolio route, which amounted to $10.35 billion over the
same period.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
NEW DELHI: The World Investment Report of the United Nations Conference on Trade and
Development (UNCTAD), released on Tuesday, revealed a decline of 51 per cent in global
FDI flows in 2001.
But the global fall primarily concerned the developed countries. Some developing countries
like India, in fact, experienced a sizeable jump in FDI inflows.
After stagnation of FDI inflows at around $ 2.5 billion for three years, India recorded inflows
of $3.6 billion in 2001. And, outward flow of FDI (that is investments made by Indian
companies abroad) amounted to $ 745 million in 2001 — a big sum indeed in view of the
capital-scarce nature of the economy.
But, the only Indian company, Reliance, which used to figure among the large transnationals
in the World Investment Report in previous years, does not find mention this year. This is
because the report now lists companies which are not just large but have large assets abroad.
With this new criteria, ONGC, with its proposed investments of billions of dollars abroad in
Sakhalin and Sudan, may perhaps find a mention in future reports.
Globally, 2001 has turned out to be an watershed year regarding FDI flows. The trend of
annual growth of over 40 per cent was reversed. The report offers a few explanations for the
drastic drop.
One, mergers and acquisitions in the developed world, main driver of FDI flows in the late
90s and in 2000, might have reached a saturation point. Second, the events of September 11,
though did not directly affect FDI flows, depressed economic sentiments and accentuated the
global economic slowdown, resulting into a massive fall in FDI flows.
The report ranks India low in terms of indices of FDI performance and FDI potential. But
economists Nagesh Kumar said the indices have been prepared with crude method and do not
reflect the true position of large economies like India.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
GENEVA: Global foreign direct investment (FDI) flows into India dropped by over 31 per
cent in 2010 despite robust economic growth, according to the United Nations Conference on
Trade and Development (UNCTAD).
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 Monday.
UNCTAD says global FDI flows remained almost stagnant in 2010, increasing by 1 per cent
to USD 1.122 trillion.
UNCTAD forecasts that global FDI flows are likely to remain between USD 1.3 trillion and
USD 1.5 trillion in 2011.
FDI inflows into India amounted to just USD 23.7 billion last year, as against USD 34.6
billion in 2009. "In India, we have seen a sharp decline and we can't explain why this has
happened," said the UNCTAD's investment and enterprise division chief, James X Zhan, who
prepared the investment report.
"We don't 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 USD 274.6 billion last year, compared
to USD 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.
53
GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
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% last year to USD
186.1 billion from USD 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 suchas 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.
54
GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
MUMBAI: The Indian economy could well be on its way out of the woods, if the money
pumped into the country by foreigners is anything to go by.
For the first time in more than one year, foreign direct investment crossed the $3-billion mark
on a monthly basis. Total FDI inflows amounted to $3,476 million in July, up 55% from
$2,247 million a month ago, shows the latest data from RBI monthly bulletin that was
released on Thursday.
More heartening though is the fact that cumulative inflows from April-July, despite being
lower at $10.5 billion compared with $12.3 billion in a year-ago period, are marginally higher
than inflows through the portfolio route, which amounted to $10.35 billion over the same
period.
This, according to experts, points to the foreign investors' faith in the resilience of the Indian
economy, which has weathered the recessionary headwinds better than most countries and is
set once again to move to a high growth trajectory. FDI inflows are inherently more stable
than the portfolio money that is invested into shares and considered more volatile.
"Inflows overall are looking up since sentiment in the India story is bullish, considering the
new government's stress on infrastructure, an improvement in industrial production and the
growth in exports in absolute terms since April. We believe going ahead, inflows will
continue to remain buoyant," said ShubhadaRao, chief economist, YES Bank.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
secondary investment, it indicates the prospects and promise that India holds for overseas
investors, said an economist with a research firm, who declined to be named.
Notably, India has also in some way done better than neighbours China and Pakistan, which
saw a dip in FDI inflows. In July, China's FDI plunged by 35.7% ($5.36 billion), though in
absolute terms, it annually receives much higher FDI than India.
The government has scaled down its FDI target for FY10 by $5 billion to $30 billion. This
works out to average monthly inflows of around $2.5 billion. The current trend indicates
growth in line with target. FDI inflow in India came down as the global recession deepened
in the months after the Lehman collapse last year. It hit a low of $1 billion in November
2008. But things started looking up after April this year, when inflows started picking up on
improved global liquidity conditions.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
Cumulative PERCENTAGEOF
inflows(august TOTAL
RANK SECTOR
1991- march2010) INFLOWS (RS)
amount in
Rs.crore(US $ IN
MILLION)
57
GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
In 2006-07 the total FDI inflow in India was US $ 22,826 million while the outflow of FDI
from India was US $ -15046 million resulting in total FDI of US $ 7693 million. Thesame
trend continued and the total FDI substantially increased to US $ 15401 million inthe year
2007-08 due to an increase in the inflow of US $ 34236 million. During theglobal slowdown
period the FDI showed a positive trend in 2008-09 with an increase of FDI to US $ 17496
million.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
(Amount in US $ million)
(i)In India 22826 87 22739 34361 125 34236 35148 166 34982
ii)abroad 764 15810 15046 2477 21312 18835 1110 18596 -17486
Equity 764 13368 12604 2477 16898 14421 1110 14668 -03558
India has emerged as the second most attractive destination for FDI after China and aheadof
the US, Russia and Brazil. India has experienced a marked rise in FDI inflows in thelast few
years. Not surprisingly India’s growth strategy has depended predominantly ondomestic
enterprises and domestic demand as opposed to FDI and export demand.1 For instance,
India’s FDI as a share of GDP in 2007 represented only about 1.7 percentcompared to 2.8
percent in China and even below Pakistan, and its share of gross fixedinvestment is 5.2
percent compared to 7.0 in China and 16.7 per cent in Pakistan
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
A recent study by consultation firm Zinnov reveals that China is likely to take over India in
terms of investment in research and development in the next few years as it is driven by
various government incentives, schemes and high level of innovation. So much is the interest
in Chinese markets that of the Fortune 500 companies worldwide, over 400 already have
R&D centres in China, according to a study by management consulting firm Zinnov. The
country plans to increase its investment in R&D to 2.5% by 2020 from 1.45% of GDP in
2006.On the other hand, India is home to only half of the Fortune 500 companies’ R&D
centres. In fact, this growth may become a threat for India. Global firms’ R&D investment in
China stands at $7.65 billion, which may soon overtake India’s market, whose size is
estimated at $7.75 billion. India had a clear edge over China till a few years ago but now
China is competing head-to-head with India, the study says.
Moreover, the fresh R&D talent pool availability in China has also increased over the years
and Chinese centres are rapidly expanding their headcount base. The fresh talent pool in
China is estimated at 56,000 while that of India is at 45,000 - a gap which will soon become
narrow. Also, unlike India, tier-II cities in China are expanding fast and aiming at a
significant share of the MNC R&D pie.
“While the Chinese MNC R&D subsidiary market is growing at 16% annually, more than
India’s 11%, the market has also undergone a transformed innovation process where the
market growth and competition from local companies made MNCs to review their business
models. This reverse innovation process, coupled with constant innovation, played a
significant role in the evolution of the Chinese R&D ecosystem. China today hosts one-third
of the global 1,000 R&D spenders with their R&D subsidiary centres,” said Praveen
Bhadada, manager-consulting, Zinnov Management Consulting.
R&D subsidiary refers to centres other than the company’s headquarters. A firm can have
multiple centres in a country. Significantly, China is increasingly becoming an R&D hub for
many of auto companies such as Audi, Toyota and Volvo. Besides, its secondary locations
now account for nearly 50% of the MNC R&D centres.Bhadada added that manufacturing
was the single largest contributor to the R&D in China followed by semiconductors, software
and telecom.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
The recession had an impact on the total foreign investments in India, as in the year 2007-
08:Q4 the net FI was $ 4760 million which fell from $ 16892 million in 2007-08:Q3.This
stagnant growth continued till 2008-09:Q3 where this further fell to $ -5376million and in
2008-09:Q4 $ 492.However there are signs of recovery as the results of 2009-10:Q1 shows
positive growth of $ 15101 million
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.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
KOLKATA: At a time when India is being noticed for becoming the fastest-growing market
for global corporations, senior managers, too, may grab greater attention in the boardrooms of
their company headquarters.
Some top MNCs, who are betting on India like never before, have started instituting
mentoring programmes for executives here to prepare them and make them ready to take on
leadership roles abroad. If things go as planned, India may soon turn out to be a talent hub for
senior management from its current status of churning out capable, though mostly middle-
management, staff.
For instance, Japan's largest consumer electronics maker, Panasonic, has identified 10
employees in its offices in India who might make it to global roles. The $105-billion
company has structured a mentoring programme specifically for senior managers who have
been identified for this. many of them are currently undergoing training, including being
groomed directly by the company's board of directors.
"We have found that Indian managers have huge potential, which has encouraged us to make
the country a sort of global recruitment hub," says Panasonic India president, Daizo Ito.
"Indian managers could well become CEOs of markets [similar to those in Asia] in the
Middle East and Africa, or even regional and business heads."
Panasonic, which wants to become India's largest electronics company by 2018, has already
charted a career plan for the identified talent, which will be carried out over a fixed time-
frame.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
India’s economy has seen a slowdown after nearly a decade of unprecedented growth, as its
companies have been vulnerable to the varying fortunes of their customers, partners and
suppliers around the world. As we begin to emerge from this crisis, there is a new sense of
urgency amongst business leaders and policymakers to address long-term challenges and
exploit fresh opportunities.
The report also sets out recommendations for policymakers that will help create the right
regulatory and administrative environment for inclusive growth.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
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 MNC’S competition increase and more employment opportunities are available &
there will be reduction in reasonal disparities
To conclude, we would opine that MNC’S 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.
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.
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GROWTH OF MNC’S IN INDIA FROM 2000 TO 2010
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