Impact on Indian Economy

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Multinational Companies(MNC's) Impact on Indian Economy

MNC may be defined as a company, which operates in number of countries and has production and service facilities outside the country of its origin. They are also called Trans National Company (TNC) Their activities have both good and bad impacts on the economy. They take decisions on a global context or basis. Their maximum profit objectives take no account of the reactions produced in the countries felling in their orbit. They operate in different institutional forms Some are: Subsidiaries companies wholly owned by MNC in other countries Subsidiary company enter into joint venture with a company another company Agreement among companies of different countries regarding production and discussion of market. Development and Activities: Soon after independence foreign capital entered India in the form of direct investments through MNC's Companies had been formed in advanced countries with the specific purpose of operating in India. Such companies started their subsidiaries, branches and affiliates in India . At times government gave some tax concession to them with in the FERA (Foreign Exchange Regulation Act) and streamlined the licensing procedures. The purpose was to secure advanced, technical and industrial know how. During the janata rule the policy was outright purchase of technical know how skills and machinery. They took two major decisions. Coco cola was asked to wind up their operation . Asked IBM to reduce their foreign equity to 40%. They did not agree, so asked to wind up MNC's operate in several sectors like tobacco, toiletries beverages etc. Industrial Policy of 1991 accepted foreign investment essential for modernization technology up gradation and industrial development. Several concessions were given FERA regulations were liberalized and permitted to use their trademarks in the domestic market. Now it has become a wide spread phenomena with USA the biggest among them. Recently a large...