Open economy – Role of MNCs in India

role of MNCs in India

Theme :-

  • Multinational Corporations (MNC) operate in more than one country.
  • In 1991, India faced economic crisis and to lift the country out of crisis, Indian government rolled out economic reforms, and hence openly opted for economic liberalisation. This allowed private investments and thereby MNCs to operate in India.
  • Initially, many economists expressed fears over allowing MNCs to India. But with time, everyone is agreeing that MNCs are playing an important role in India and have been helpful for our economy.

Role of MNCs in India :-

  • Governments have so many responsibilities such as alleviating poverty, providing social security and to develop the nation financially etc. But with limited funds, it has to prioritise the things to do. In the process, it is very difficult for governments of developing countries to invest in economic development. MNCs help governments in this case and bring a lot of foreign investment which paves the way for economic development of the country.
  • Unemployment is one of the serious problems of India. MNCs provide employment opportunities and helps in solving this issue to some extent. As the wages will inturn be spent on buying goods and services in India, it’ll be helpful for Indian economy.
  • Government will also get revenue in the form of taxes that MNCs pay.
  • MNCs are also helpful in knowledge transfer. As MNCs operate in more than one country, they practically tests and implements the best strategies. This technological and knowledge transfer helps the host countries.
  • As MNCs give tough competition to domestic companies, people will get better quality products and possibly lower prices.
  • As many MNCs reinvest their profits in the host countries, it will be a plus to the host countries’ economy.
  • MNCs have better access to foreign markets. Some MNCs in India are tapping export markets and are helpful in improving the overall exports of India and thereby reducing trade deficits.
  • MNCs helps host countries in maintaining a better relations not just with their home countries, but also with the countries that they have trade relations.
  • Indian MNCs are improving the status of India in international community.

Conclusion :-

In the modern world, globalisation is inevitable. Though there were so many fears when India allowed MNCs into the country, they have been playing an important role in the India’s economic development. But not all MNCs are helpful for the host country. Some companies establishes their businesses in other countries with the only motive of capturing the domestic market. Governments should be cautious in allowing this type of companies.

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1 comment

  1. Foreign Direct Investment is one of the best way to increase the flow of foreign currency to our country. Other than that it also provides high quality employment opportunities. Also as a result of foreign investment varieties of products are available in our market.
    However certain cons are also there for FDI .Let me explain it through an example. MIcromax an Indian brand which was wiped out of market was once a leading cellphone manufacturing company. Micromax had gained its popularity during the monopoly of Samsung in the industry. It was of good quality and was cheap in price. But as FDI in telecom idustry increased more and more companies started to establish their firms in India. As a result the new companies provided phones which were cheaper in rate to customers and finally the brand micromax lost its hand in market and hence it vanished.
    The above example shows the direct effect of FDI in telecom industry. Likewise there are many domestic brands that lose its market due to FDI. Our country India standing second in world population doesn’t lack human brain instead we lack coordination. The CEO of Microsoft and Google are Indians. But there is no company in India to compete with these tech giants.
    In my opinion government has to take decisive steps to ameliorate the domestic sector along with the FDI to make India one among the superpowers of the world

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