MNC and its impact on Indian Economy

Introduction

The growing integration of economies and societies around the world has beenone of the most hotly-debated topics in international economics over the past few years.Rapid growth and poverty reduction in India, and other countries that were poor 20years ago, has been a positive aspect of Liberalization Privatization and Globalization(LPG). But MNCs have also generated significant international opposition overconcerns that it has increased inequality and environmental degradation. There is a need tostudy the impact of Multinationals on India from the viewpoint of inwardforeign direct investment.

The MNCs play an important role in the economic development of underdeveloped countries. What are multinational companies? These are enterprises or organizations with services spread across more than one country on a global scale. They are huge industrial organizations which extend their industrial and marketing operations through a network of their branches or their majority owned Foreign Affiliates (MOFAs). MNCs are also known as Transactional corporations (TNCs). Instead of aiming for maximization of their profits from one or two products, the MNCs operate in a number of fields and from this point of view, their business strategy extends over a number of products and over a number of countriesIndia is a home to a number of multinational companies since the countrys market was liberalized in 1991. India houses majority of multinational companies hailing from the United States. There are also multinational companies from other countries. The multinational companies from the United States account to 37% of turnover of first 20 firms that operate in India; the others come from European Union and their Asia counterparts.

The historical background of MNC investment in India can be traced back with the establishment of East India Company of Britain. However, researchers could not portray the complete history of FDI pouring in India due to lack of abundant and authentic data.British capital came to India during the colonial era of Britain in India. After Second World War, Japanese companies entered Indian market and enhanced their trade with India, yet U.K. remained the most dominant investor in India. Further, after Independence issues relating to foreign capital, operations of MNCs, gained attention of the policy makers.

Since 1991,India has experienced dramatic increase in the presence of Moultinational corporations and with it, tremendous increase in the amount of Foreign Ditect Investment (FDI) inflows to the Indian economy after opening up of economy. The reason for the liberalisation was the severe economic situation India faced during that time.