A MINOR PROJECT REPORT

ON
Study on Role of MNC’s in Indian Economy

Submitted in partial fulfillment of requirement of Bachelor

Of Business Administration

BBA-II Semester (Evening)

Batch 2021-2024

Submitted to: Dr. Sunita Tomar Submittedby:Prem

Kumar
(Assistant Professor)

. (03824501721)

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JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL,
KALKAJI

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 DECLARATION

This Project on The Study on Role of MNC’s in Indian

Economy is completed under the guidance of Dr. Sunita Tomar is the
original work done by me and never been submitted anywhere.

PREM KUMAR
BBA II (Evening)

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 CERTIFICATE OF COMPLETION

This to Certify that Prem Kumar of BBA has Completed this

project on “A Study on Role of MNC’s in Indian Economy”, carried out
for the partial fulfillment of requirement of Bachelor of Business
Administration.) of Jagannath International Management School under my
Guidance is up to my Satisfaction.
This project is original and not been submitted anywhere else.

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 ACKNOWLEDGEMENT

A lot of effort has gone in to this training report. My thanks are due to many
People with whom I have be closely associated.
I would like to thank all those who have contributed in the completion of
this project. First of all, I would like to send my sincere thanks to Dr.
Sunita Tomar for her kind advices as well as the helpful hand which she
provided me in order to complete this project.
I would like to thank my Mentor for her teaching as well as training.
And last but not the least I would like to thank my entire beloved family and
friends for providing me monetary as well as non-monetary support as and
when required without which this project would now have completed on
time. Their trust and patience are now coming out in form of this project.

PREM KUMAR
BBA II (Evening)

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 CONTENT
S.no Description Page no.
1. Declaration 2

2. Certificate 3

3. Acknowledgement 4

4. Contents 5

6. Introduction 6-13

7. Objective 14-15

8. Literature Review 16-20

9. Industry profile 21-27

10. Research methodology 28-30

11. Analysis and Interpretation 31-48

12. Limitation of Study 49-50

13. Conclution and recommendation 51-52

14. Bibliography 53-54

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 INTRODUCTI
ON

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 INTRODUCTION TO THE TOPIC

Multinational Corporations (MNC) are those corporations that have

its assets and business in more than one country including its home country.
These corporations have offices or manufacturing units in different countries
and usually have a corporate head office in the mother country which is
responsible for coordinating global management. Most of the multinational
companies earlier were either American or European or Japanese.

But, of late Indian companies have also started to put their footprint
at the international level. Multinational companies are like a double edged
sword, on one hand it create jobs, brings technology, provides best practices
to the industry; on the other hand MNCs work as lobby in influencing
government policies in their favour and can lead to shutting down local
industries and products due to its economic and technological powers. MNCs
made it foray in India after 1991 economic reform. The LPG (Liberalisation,
Privatisation, Globalisation) reform opened the Indian economy to companies
across the world. MNCs are also known ‘Transnational Companies’. India
hosts the largest number of number of MNCs from USA and Europe. Standard
Chartered Bank, Coco-cola, SONY Electronics , etc. are some examples of
multinational companies.

ROLE OF MNC’S IN INDIA:

• Unemployment is one of the serious problems of India. MNCs provide

employment opportunities and helps in solving the unemployment issue to
some extent. As the wages will in turn be spent on buying goods and
services in India, it’ll be helpful for the Indian economy.

• The government will also get revenue in the form of taxes that MNCs pay.

• MNCs helps host countries in maintaining 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 the international
community. MNCs are also helpful in knowledge transfer. As MNCs operate
in more than one country, they practically test and implement the best
strategies. This technological and knowledge transfer helps the host
countries.

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• As MNCs give tough competition to domestic companies, people will get
better quality products at lower prices.

• As many MNCs reinvest their profits in the host countries in general, 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 help in reducing trade deficits.

• Governments have many responsibilities such as alleviating poverty,

providing social security and to develop the nation financially etc. But with
limited funds, it has to priorities 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 the economic development of the
country.

CRITICISM OF MULTINATIONAL CORPORATION

• They do not give enough importance to the society in which they operate.
An example is Union Carbide, which did not show concern for the people of
Bhopal.

• While many Indian companies, such as the Tatas and Birlas allocate funds
for charitable works like hospitals, temples and scholarships for higher
studies, not many MNCs do so.

• They generate profits when the situation is favourable, but will close their
business if any risk is anticipated. E.g., many multinationals pulled out of
South East Asia during the currency crisis.
• Active participation is needed in developing countries for infrastructure,
especially roads, ports, power plants etc. However, most multinationals in
India deal in nonessential products such as soaps, shampoos, lotions and
other consumer products. Hardly any multinational is getting involved in
developing activities such as infrastructure.

• There is a misconception that MNCs generate employment. However the

managerial cadre and the sales force personnel do not represent real
employment in developing countries.

• Due to aggressive promotion and money power, MNCs can venture into
small towns in all parts of the country, leading to the decline of small
industries.

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 • One Union Carbide could cost the life of thousands of living beings in
Bhopal due to sheer negligence and disrespect for the pollution control
norms. It shows that just for earning money such a multinational never had
a concern for valuable human lives.

SUGGESTIONS IMPLEMENTED TO AVOID CRITICISM

• They should honour the national sovereignty of host countries and work as
per the their regulatory framework of business and national ethos.

• They should help in achieving the economic goals, development objectives

and socio - cultural values of the host countries.

• They should adopt business ethics and best business practices like timely
payment of required taxes, abstention from involvement in anticompetitive
practices, consumer and environmental protection and to work as a model
employer.

• They should be sensitive to human rights, corporate reporting, corporate

governance, better competition etc.

• They should contribute in the development of science and technology in the

host country. They should also work for the development of R&D facilities in
the host country rather than transferring obsolete technology for production
in the host country.

Types of MNC’s
1. Colonial Companies:

Colonial companies are those companies which are established to procure raw
materials for the parental office at native country. They monopolies the purchasing
of raw materials. They have rights to operate in different countries. East India
Company’s name can be cited in this respect.

2. Resource Based Companies:

It is the second category of multinationals. These companies purchase raw

resources from several countries. They do not believe in exploitation and
purchasing of mineral resources. Many developed and developing countries have
propagated such types of companies.

3. Public Utility Companies:

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The public utility companies are established to help the people of the country. The
companies enjoy the position of natural monopoly. The multinational in public
utility concerns do not remain longer because of nationalism.

4. Service MNCs:

A service MNC is a transnational corporation which generates more

than 50% of its revenues from services. Services are such as banking, insurance,
finance, transport, tourism etc.

5. Manufacturing MNCs:

A manufacturing MNC is one which generates at least 50% of its

revenue from manufacturing process or activity. Most of the MNCs operated in
manufacturing sector.

6. Trading MNCs:

A trading MNC is one which generates at least 50% of its revenue

from the trading activity. These are the very oldest form of multinationals.
7. Licensing:

The multinationals grant licenses to some domestic companies to use their

trademarks and technical know-how. The license is granted to exploit potential
market in the host countries who pay license fees annually to the multinationals
to use their know-how for a fixed period. The license fee may be in lump sum to
purchase the know-how.

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 REASONS FOR MULTINATIONAL COMPANIES
TO CONSIDER INDIA AS A PREFERRED
DESTINATION FOR BUSINESS IN FUTURE

● India is a developing economy. Per capita income is increasing due to

high growth rate in gross domestic product. Levels of saving, investment

and employment opportunities are increasing at a faster rate. Rate of
literacy is also improving. Life style is also under change. Due to these
factors, MNCs are considering India as an emerging market for their
products and services. Drugs and pharmaceuticals, capital goods, white
goods automobiles, banking and financial services, food products and
beverages are the major sectors where MNCs are playing their
important roles.

● 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. Since 1991 Government of India has started the
economic reform process in the economy. Liberalisation, privatization
and globalization have created conducive environment for foreign
investment specially foreign direct investment. Several sectors have
been opened for FDI investment in terms of different scales. It has given
favourable opportunities to multinational companies to invest huge fund
under direct investment programme. The India as destination for FDI
has been attracting huge amount for accelerating the pace of economic
development.

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● Developing economy specially India is quite labour competitive in

comparison to developed economies like USA. Availability of knowledge

workers have also motivated MNCs to select India as an investment
destination. With the result MNCs are quite motivated to set up their
production and service base in India in place of their host countries.
Since labour is quite cheap here, MNCs are able to reduce their overall
cost of production. Suzuki Motors Corporation is best example which is
quite successful in producing more motor car than in Japan. It is also
successful in its export efforts of Suzuki Motor Car to developed
nations.

● Socio economic and political culture of India is quite harmonious and

stable. Political stability of the country is good enough for attracting FDI.
Availability of raw materials, labour, demand for products, capital
formation, saving, investment ratio etc., are quite favourable. Economic
policies are suitable and favourable for MNCs Continuous evaluation;
monitoring and consequential adjustments in economic reforms process
actually encourage the MNCs to treat India as their best investment
destination.

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OBJECTIVE OF
THE STUDY

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 OBJECTIVE OF THE STUDY

⮚ To evolve and elaborate the conceptual framework of the Multinational

Corporations.

⮚ To examine and study the effects of liberalisation on Multinational

Corporations in India

⮚ To study the positive and negative effects of MNC’S in India.

⮚ To know how MNC’S are growing day by day in India.

⮚ SWOT analysis of MNC’S in India.

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LITERATURE REVIEW

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 LITERATURE REVIEW
● Multinational Companies (MNCs) are large companies that operate in

several countries with their headquarters at a particular country.

Multinational Companies as recently have gain more momentum in terms
of investment and playing a greater role in countries’ development, it
succeeded in having more attention and more focus. The first
Multinational Companies were established in the year 1920’s. Many more
came up in the 1950’s and 1960’s as U.S. businesses expanded
worldwide and Western Europe and Japan also recovered to become
powerful industrial economies.

● The world wide spread of MNCs was a notable feature of 1950’s and

1960’s. This was partly because high import tariffs imposed by different
governments forced MNCs to locate their manufacturing operations and
become ‘domestic producers’ in as many countries as possible.
Multinational Companies are generally operated in the less developed or
developing countries with their head office in the foreign developed
countries. They have been playing a significant role in the economies of
those countries where they are operating. As the two sides of a coin,
operation of Multinational Companies has both the advantages as well as
drawbacks to such countries.

● In underdeveloped countries like India domestic savings are not enough to

ensure economic development. In such a case some external helps are

required in the form of “foreign aid”. If we turn the pages of history relating
to economic development, we find that every country had to rely on
foreign aid for speeding up the economic growth. In the words of W.A.
Lewis, “Nearly every developed state has had the assistance of foreign
finance to supplement its own meager savings during the early stages of
its development. England borrowed from Holland in the seventeenth and
eighteenth centuries, and in turn came to lend to almost every other
country in the world in the nineteenth and twentieth Centuries. The United
States of America, now a rich country in the world borrowed heavily in the
nineteenth century and is in turn called upon to become the major lender
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 of the twentieth” It is thus not the underdeveloped countries alone which
need foreign capital for economic development but even the advanced
countries of Europe had to seek external aid in the initial stages of their
development. If underdeveloped countries wants to see develop herself, it
will have to import capital goods, technical know-how, spare parts and raw
materials.

● One method of paying for such imports is through the stepping up of

exports. The exports can be increased either by producing more or

curtailing domestic consumption drastically. But underdeveloped countries
have only limited productive capacity and as such it is not possible to
increase exports substantially. Curtailment of consumption, on the other
hand, involves a lot of sacrifice and it cannot be adopted with much
success in democratic countries. Thus foreign assistance is the one form
or the other which became important for speeding up the economic growth
of a country. Many MNCs have larger annual sales volumes than the
entire GNPs of developing nations in which they operate. By 1980 the 20
largest MNCs had annual sales volume excess of $10 billion, while more
than 200 others had sales in excess of $1 billion.

● The largest U.S. transnational (MNCs) like Exxon and General Motors,

each sold over $60 billion in 1980; while Mobile, Texaco and Ford each
had annual sales in excess of $30 billion. In recent years there has been
tremendous increase in the private foreign investment. In this connection,
it is required to mention that foreign direct investment by multinational
companies involves much more than just transfer of capital as it brings
with them technologies of production, managerial services and other
business practices. In the past, investment by MNCs was mainly confined
to extractive activities but of late manufacturing interests account for a
greater share of their activities.

A literature review or narrative review is a type of review article. A

literature review is a scholarly paper, which includes the current

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 knowledge including substantive findings, as well as theoretical and
methodological contributions to a particular topic:

(Shameema Ferdausy,Md. Sahidur Rahman 2009) The MNCs

are firms those own and control production facilities in two or more countries
and produce and distribute goods and services across national boundaries;
they spread ideas, tastes, and technology throughout the world; and they plan
their operations on a global scale. Such companies have offices and/or
factories in different countries and usually have a centralized head office
where they coordinate global management.

(S.Tamer Cavasgi & et al 2009) MNE is a large company with

substantial resources that performs various business activities through a
network of subsidiaries and affiliates located in multiple countries.

(J. W. J. Harrod 2009) MNC as privately owned organizations

which have production, whether goods or services, and the generation of
financial surpluses, as objectives, and, which own assets used for such
production in more than one national unit in a global complex of nation-states.

Dictionary of International Trade 2017) A large commercial

organization with affiliates, operating companies in a number of different
countries. A typically one normally functions with a headquarters that is based
in one country, while other facilities are based in locations in other countries. In
some circles, this type of corporation is referred to as a multinational enterprise
(MBE) or a transnational corporation (TNC). There are several models of
multinational corporations.

(Harish Tigari Faculty Member, Department of Commerce

Davangere University 2019) India is one of the faster growing emerging
economies in the world. For this many industries are contributing that may be
Indian or foreign origin company. By observing the statistics, 49.86 % of
contribution by MSMEs towards nation export and the remaining by large
companies only. MNCs (multinational corporations) are also contributing to the
growth of the country by generating employment, the inflow of FDI, transfer of
technology etc.

Dr. Ranjan Kshetrimayu m & Pushparani Naorem MNC role in

development of countries. Analysing multinational corporations in Indian

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market, especially in globalization. Economic development and Fdi. Findings
revealed that “Make in India “and skill Indian campaigns by PM invites Global
companies for investing In India which increases the economic and Fdi
growth. Making India Favourite destination for, mnc’s. 3 Trend of FDI in India
and Its Impact on Economic Growth Vinay Kumar Fdi statistics with different
sectors. To analyse the trend of FDI it relation with economic Growth in India.
Findings revealed that Fdi has positive trend and correlation with Gap which
leads Indi most promising investment destination for most of the developed
and developing nations Impact of Multinational Corporations on Developing
Countries Shameema Ferdausy Shameema Ferdausy & Md. Sahidur Rahman
Statistical study over a period of years showing the impact of MNCs on host
States. Identify the overall positive and negative impact of MNCs on
developing countries, discussing the factors to attract, more MNC’s. MNC
plays important role, Showing both negative as well as positive impact on the
country.

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SOME MULTINATIONAL
COMPANY PROFILE

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 SOME MULTINATIONAL COMPANY PROFILE

1. HONDA –

Company Name: - Honda Motor Co., Ltd.

Head Office: - Tokyo, Japan
Established: - September, 1948
Founder: - Toshihiro Mibe
Executives: - Seiji Kuraishi, Kohie Takeuchi, Asako Suzuki,
Masafumi Suzuki, Kunihiko Sakai, Fumiya Kokubu, etc.
Main Products: - Motorcycles, automobiles, and power products

The Honda Motor Company, Ltd. is a Japanese public multinational

conglomerate

manufacturer

automobiles,

motorcycles,

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equipment, headquartered in Minato, Tokyo, Japan.

Honda has been the world's largest motorcycle manufacturer since

1959, reaching a production of 400 million by the end of 2019, as well as the
world's largest manufacturer of internal combustion engines measured by
volume, producing more than 14 million internal combustion engines each year.
Honda became the second-largest Japanese automobile manufacturer in 2001.
Honda was the eighth largest automobile manufacturer in the world in 2015.
2. Coca- Cola -

Company Name: - Coca-Cola, Ltd.

Head Office: - Atlanta, Georgia, United States
Established: - January, 1892
Founder: - James Quincey
Executives: - John Murphy, Stacy Apter, Lisa Chang, etc.
Main Products: - Beverages

The Coca-Cola Company is an American multinational beverage corporation

incorporated under Delaware's General Corporation Law and headquartered
in Atlanta, Georgia. The Coca-Cola Company has interests in the
manufacturing, retailing, and marketing of nonalcoholic beverage concentrates
and syrups. The company produces Coca-Cola, invented in 1886 by pharmacist
John Stith Pemberton. In 1889, the formula and brand were sold for $2,300
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 (roughly $67,000 today) to Asa Griggs Candler, who incorporated The Coca-Cola
Company in Atlanta in 1892.

The company has operated a franchised distribution system since

1889. The company largely produces syrup concentrate, which is then sold to
various bottlers throughout the world who hold exclusive territories. The company
owns its anchor bottler in North America, Coca-Cola Refreshments. The
company's stock is listed on the NYSE and is part of DJIA and the S&P 500 and
S&P 100 indexes. The Coca-Cola Company is the world's largest producer of
plastic waste.
3. BMW (Bayerische Motoren Werke Aktiengesellschaft) -

Company Name: - Bayerische Motoren Werke AG (BMW)

Head Office: - Munich, Germany
Established: - March, 1916
Founder: - Karl Rapp and Gustav Otto
Executives: - Oliver Zipse, Pieter Nota, Norbert Reithofer, Ilka Horstmeier, etc.
Main Products: - Luxury Vehicles and Motorcycles.

Bayerische Motoren Werke AG, commonly known as Bavarian Motor

Works, BMW or BMW AG, is a German automobile, motorcycle and engine
manufacturing company founded in 1916.
BMW is headquartered in Munich, Bavaria. It also owns and produces
Mini cars, and is the parent company of Rolls-Royce Motor Cars. BMW produces
motorcycles under BMW Motorrad. In 2012, the BMW Group produced 1,845,186
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automobiles and 117,109 motorcycles across all of its brands. BMW is part of the
“German Big 3” luxury automakers, along with Audi and Mercedes-Benz, which
are the three best-selling luxury automakers in the world.
This company was renamed to Bayerische Motoren Werke (BMW) in
1922. However the name BMW dates back to 1913, when the original company
to use the name was founded by Karl Rapp (initially as Rapp Motorenwerke
GmbH). BMW's first product was a straight-six aircraft engine called the BMW
IIIa, designed in the spring of 1917 by engineer Max Friz. Following the end of
World War I, BMW remained in business by producing motorcycle engines, farm
equipment, household items and railway brakes. The company produced its first
motorcycle, the BMW R 32 in 1923.
4. Microsoft -

Company Name: - Microsoft Corporation

Establishe
d: - April,19
Founder:- Bill Gates,Paul Allen
Executives: - Satya Nadella, Rajesh Jha, Judson Althoff , Kathleen Hogan,etc.
Main Products: - Softwares

Microsoft Corporation is an American multinational technology

company which produces computer software, consumer electronics, personal
computers, and related services. Its best known software products are the
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 Microsoft Windows line of operating systems, the Microsoft Office suite, and the
Internet Explorer and Edge web browsers. Its flagship hardware products are the
Xbox video game consoles and the Microsoft Surface line up of touchscreen
personal computers. Microsoft ranked No. 21 in the 2020 Fortune 500 rankings of
the largest United States corporations by total revenue; it was the world's largest
software maker by revenue as of 2016. It is considered one of the Big Five
companies in the U.S. information technology industry, along with Google, Apple,
Amazon, and Facebook.
Microsoft (the word being a portmanteau of "microcomputer software")
was founded by Bill Gates and Paul Allen on April 4, 1975, to develop and sell
BASIC interpreters for the Altair 8800. It rose to dominate the personal computer
operating system market with MS-DOS in the mid-1980s, followed by Microsoft
Windows. The company's 1986 initial public offering (IPO), and subsequent rise
in its share price, created three billionaires and an estimated 12,000 millionaires
among Microsoft employees. Since the 1990s, it has increasingly diversified from
the operating system market and has made a number of corporate acquisitions,
their largest being the acquisition of LinkedIn for $26.2 billion in December 2016,
followed by their acquisition of Skype Technologies for $8.5 billion in May 2011.

5. Google -

Company Name: - Google, Inc.

Head Office: - Mountain View, California, United States
September,
1998
Established: -
Founder:- Larry Page, Sergey Brin
Executives: - Sundar Pichai, Benjamin Fried, Eric Schmidt, Jon Alferness, etc
26
 Main Products: - Softwares

Google INC. is an American multinational technology company that

specializes in Internetrelated services and products, which include online advertising
technologies, a search engine, cloud computing, software, and hardware. It is
considered one of the big four Internet stocks along with Amazon, Facebook, and
Apple
Google was founded in September 1998 by Larry Page and Sergey Brin while
they were Ph.D. students at Stanford University in California. Together they own
about 14% of its publicly-listed shares and control 56% of the stockholder voting
power through supervoting stock. The company went public via an initial public
offering (IPO) in 2004. In 2015, Google was reorganized as a wholly owned
subsidiary of Alphabet Inc.. Google is Alphabet's largest subsidiary and is a
holding company for Alphabet's Internet properties and interests. Sundar Pichai
was appointed CEO of Google on October 24, 2015, replacing Larry Page, who
became the CEO of Alphabet. On December 3, 2019, Pichai also became the
CEO of Alphabet.

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RESEARCH
METHADOLOGY

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 RESEARCH METHADOLOGY

Research methodology is a way to systematically solve the problem.

It is a game plan for conducting research. In this we describe various steps that
are taken by this research.

The research design consists of the data; it can be classified into two
types of primary and secondary data. The data which does not exist can be
called as primary data and the data which is existed can be called secondary
data. The present study is based on secondary data available in different books,
journals, articles, research papers, and internet source also. The main
objectives of the present study are, to examine MNCs are contributing to
economic development and to analyze the role of FDI in Economic
development. The present study attempts to analyze the relationship between
foreign companies’ mode of entry with FDI and economic variables by using
Karl Pearson coefficient correlation.

Research Methodology is the conceptual structure within which

research is conducted. It constitutes the blueprint for the collection
measurement and analysis of the data.

Research Methodology is a framework for the study and is used as a

guide in collecting and analyzing the data. It is a strategy specifying which
approach will be used for gathering the data. It also includes time and cost
budget since most studies are done under these two constrains. The research
methodology includes overall research design, the sampling procedure, the data
collecting method and analysis procedure.

METHOD OF COLLECTING DATA

After the research problem has been identifies and selected the next
step is to gather the requisite data. While deciding about the method of data
collection to be used for the research should keep in mind two types of data i.e.
Primary and Secondary.

PRIMARY DATA
The primary data are those, which are collected afresh and for the
first time, and thus happened to be original in character. We can obtain primary
data either through observation or through direct communication with
respondent in ine form or another or through personal interview.

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 Method used in primary data collection -
• Observation Method
• Interview method
• Questionnaire Method

SECONDARY METHOD
The secondary drat on the other hand, are those which have already
been collected by someone else and which have already been passed through
the statistical processes. When the research utilizes secondary data then he
has to look into various sources from where he can obtain them. For e.g.
• Books
• Magazines
• Newspaper
• Internet
• Publications  Reports.

THIS PROJECT IS COMPLETELY BASED ON SECONDARY

DATA

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ANALYSIS AND
INTERPRETATION

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 DATA ANALYSIS AND INTERPRETATION

An Analysis on the Effect on MNCs on India since Liberalization:

Since 1991, India has experienced a dramatic increase in the presence of
multinational corporation (MNCs), and with it, a tremendous economy. This will
analyse the effect which this change has had on India society. In particular, three
questions will be addressed: How and why did this dramatic change occur? What
are the cost and benefits to India associated with this change? And what must
India do to continue its development? The overall conclusion reached is that the
increased presence of MNCs has had a positive impact on India. However, India
has not even come close to reaching its potential, and thus, much more change
needs to occur.

The Economic Benefits of Liberalization to India:

The effects of Liberalization on Indian’s Economy have been overwhelmingly
positive, and the statics confirm this. Due to the crisis of 1991, the growth rate
that year was only 1.2%. Three years later, a growth rate of 5.5% was reached
and then the economy took off in 1995 and 1996, achieving growth of 7.1% and
7.5% respectively. In fact, since 1994 the Indian economy has grown at an
average of 7% per year, placing Indian among the world’s leaders in economic
growth. However, because of Indian’s high population growth rate it is necessary
to consider the GNP per Capita figure. In 1991, real GNP per Capita, adjusted for
purchasing power, was $1150. In 1997, it had grown to $1385. Thus, India’s high
growth has been large enough not only to balance the population growth rate, but
also to increase the standard of living. Some other noteworthy statistics are the
decline of India’s death rate, from 10.1 per 1000 in 1991to 9.0 per 1000 in 1994,
and the increase in life expectancy, from 55.9 in 1990 to 63.9 in 1995.
The question which remains, is to what degree can the improvements in India’s
economic situation can be attributed to the MNCs? The benefits and advantages
which MNCs bring to host countries have already been discussed, and it was
argued that MNCs could have a significant impact on Indian economy. Thus, it
can be presumed the MNCs played a vital role in the economic development

32
India has experienced over the past several years, However, rather than
speculating on how much of India’s progress can be credited to the
multinationals, the essay will turn instead to the tangible and direct benefits which
India has gained through MNCs.

DIRECT BENEFITS TO INDIA OF THE INCREASING

PRESENCE OF MNCs

An emerging trend of increased multinational presence in India is that

“about 2,000
Indians leave India annually to take up middle and senior
management jobs elsewhere in Asia”. As MNCs expand operations all over Asia,
they eventually experience shortages of qualified people to fill managerial
positions, and India’s business schools have come to be seen as a good source
of managerial skill. The reason for this is India’s good education system, its
above average English-language skills, and its business students, who “are quite
entrepreneurial in their outlook”. The positive effects this has on India include
increased incomes for those Indians which take these managerial positions, and
increased incomes for Indians in general, as much of the income would be
brought back into India as repatriated earnings and would trickle down through
the economy.

Another emerging trend resulting from rising FDI is that instead of

India’s federal government “inviting foreign investment and then allocating
inflows to the states, the initiative now lies with the states themselves”, and as a
result, “attracting foreign capital has become top priority on every state
government’s themselves”. The result is that India’s states are now competing
with each other for FDI, and among the few progressive states, this has led to a
battle of incentives and the abolishment of many bureaucratic delays. Now, the
benefits of this are not just the increased level of FDI which can be expected to
result from these changes in state policies toward MHCs. As well, “slate
governments are free to identify the industries in which they want private
investment”, although they must stay within the national objectives. Thus, FDI is
more effectively allocated, as state governments understand better than the
federal government where the FDI should be directed so that the benefits to the
people of that state are maximised.

Another benefit concerns India’s growing middle class. Estimates of

the size of the middle class are wide ranging, but even modest estimates such as
200,000,000 still indicate that over 20% of India’s population can afford “durable
and semi-durable goods”, such as household appliances and cars. The role here
for MNCs is obvious: to supply India with the international brand name consumer
goods it wants. The central economic benefit of this is that Indian consumption is
33
now able to expand, rather than being limited as it was when only domestic
producers were supplying consumer goods, and this implies that Indian
consumers gain utility, or satisfaction.
Connected to this is the fact that many MNCs rely on India as a
source of inputs. India has a “huge reservoir of trained, skilled and relatively
inexpensive” labour, such as “low-cost engineering talent”, as well as an even
larger supply of unskilled workers. In addition to supplying labour, India also
provides MNCs with other inputs to production, such as intermediate
manufactures. In fact, Japanese MNCs in India rely on local sourcing for 77% of
their inputs, as compared to 50% in China.
Thus, MNCs are effective in stimulating India’s domestic production,
which often leads to greater competition, increased efficiency, and hence, a rise
in production. An example of an MNC which benefits India in this way is
MacDonald’s (“Food for Politics”, p.72). Since entering the Indian market in 1996,
this franchise has made a point of “projecting itself as a local enterprise”, in that it
relies entirely on local sources for its ingredients, and control of management is
equally split between foreigners and Indians.
MNCs have also played a crucial role in helping to supply India’s ever
increasing demand for infrastructure. Electricity is one of these critical sectors, as
India’s demand for power is simply massive (Schuman, 1995, p.162). Since
India’s government opened this sector to private investment, 41 contracts have
been awarded, the most notable of which is the enormous $2.8 billion, 2,015-
megawatt plant by Enron, which began construction in 1997 (Schuman, 163).
Despite these advances, the Indian government estimates that it will require
$170 billion in investment over the next 15 years, in order to meet its demund for
power, (“Still loved”, 35) most of which is expected to be FDI. Another sector in
which FDI has helped to fdl the investment gap is telecommunications. In the
next decade, India expects “foreign investors ... to

provide it with $50 billion”, and approvals for FDI “in cellular phones
alone total $5 billion” (“Food for Politics”, 72). Thus, MNCs have played, and will
continue to play a pivotal role in India in terms of infrastructure development.

34
 SWOT ANALYSIS OF MNCs

STRENGTHS

1. RISK TAKER : Started professional career with a Startup firm, an IT product

development company over MNC an opportunity to work with various
department experts and gain knowledge in the process.

2. HARD WORKING: Face of the Company, at a very early stage of the

careerresponsible for managing one of the largest accounts of the company.
Majorly associated with Finance Solutions, Healthcare, Automotive and
Telecom industriesSuccessful in generating a business of over 1 million dollar
annually, from the assigned account.

3. EXPOSURE: 5 year of experience in Sales, Pre-sales and Client Serving.

Good at customer presentation and analysis- prepare GTM {Go to Market}
strategy for client organisation. Experience in team handling.

4. Established Local and Global Reputation.

5. Diverse Product Portfolio.

6. Clear Defined Strategy and Business Principles.

WEAKNESS

1. High Mobilization Cost.

2. Product Gap in non-dairy product line with limited product offering for the
lactose Intolerant.

3. Use of Pesticides for seasoning product.

4. Believes in building trustworthy relationship and hence the process take some
Time.

35
 OPPORTUNITY

1. GROWTH: Currently associated with one of the fastest growing Data

Management – Big Data Company, recognized by Garter as LEADERS in its
category.

2. Attract new Industries.

3. Direct Communication between Multinational Corporation and Consumers

during Store Promotions.

4. Partnership with the diabetes association of Trinidad and Tobago(DATT).

5. Extend product lines to capitalize on fitness and health trend in the region.

6. Emerging Markets for some of its products.

THREATS

1. Strong Competition from other MNCs and Caribbean-based companies.

2. Emerging shifts in customer lifestyles which may lead to reduced consumption

of dairy & sugar based products.

3. Projected Economic difficulties on a national scale which may reduce customer

spending.

4. Local Economic climate can impact MNCs Value Chain.

5. Government Promoting Local Industries.

36
 ADVANTAGES AND DISADVANTAGES OF MNC

ADVANTAGES -

(1) Assure Quality Standards

Multinationals companies mostly have large size and more influence, so these
companies tries more to provide higher quality or experience than expected to
each customer. These things assure to the customers that, they are getting a
good quality of products even at less price.

(2) Modern Technology

New technology has an important role in cutting down the cost of production
which affects reduce in the price of goods and produces quality goods on a
large scale. These companies get the latest and upgraded technology from
foreign countries. This help developing and poor countries to improve the
technological level.

(3) Research and Development

The resources and experience of multinational companies in the field of
research help the host country to make product research and development
system. This helps the host country to improve the product quality at a low
price.

(4) Growth of Industry

Multinational companies are experienced and fast-growing in nature. These
companies also offer growth opportunities for domestic industries. MNC helps
local producers or domestic industries by setting up partnerships and uses the
local companies for the supply of raw material to make goods for the
international level market.

(5) Expands Export

Multinational corporations produce goods for an international market. It helps
the host country to increase the export of goods. This supports developing

37
countries to earn foreign money and improves the Balance of payment.
Balance of payment improves when exports increase and imports decrease.

(6) Best Utilization of Resources

These MNC companies assure the best uses of natural and other resources to
the country. These companies try to reduce duplication and waste things which
leads to the best utilization of resources. This way country receives more
benefits from the scarce resources.

(7) Expand Local Industries

Multinational corporations provide a ready-made market to local/domestic
suppliers for getting raw material or semi-finished products to make finished
products. Most of their requirement in respect of raw materials, spare parts,
etc. is being met by local suppliers.

(8) Management Job Opportunities

These companies open management opportunities to the management
students of the host country. These students can get jobs as professional
managers by multinational companies. They can earn an impressive salary
and build a reputation for the country

(9) Development of Country

Multinational companies help developing countries to increase efficiency and
productivity in production, sales, finance, etc through the transfer of technology
and foreign investment in the hosting country.

(10) Taxes and Other Expenses

Taxes are one of the areas where every MNC wants to take advantage. Many
countries allow reduced taxes on exports and imports in order to increase their
foreign exposure and international trade.

38
 (11) Increase Employment
In terms of employment, Multinational corporations hire workers to produce
goods on a large scale. More workers needed when a company needs to
increase production. This result can lead to Increase employment.

(12) Remove Monopolies

When a multinational company enters into any market they compete with
existing competitors, this can result in removing the monopoly of some large
companies. In the long run/time, the presence of multinational companies in
the market along with domestic companies is beneficial to the consumers
because customers can get more benefits like less price, better quality, more
availability of products.

(13) Improvement in Standard of Living

By providing the best quality products and services at a better price, MNCs
help to improve the standard of living of people of host countries.

DISADVANTAGES -

(1). Damage Environment

Multinationals corporations require or like to produce goods in bulk
so that become more efficient and cheap. This may not always be the best
environmental practice. Sometimes these companies produce goods using low
standards, it does lower prices but it also damages to the environment i.e
Creating air & water pollution, etc. Poor governments exchange environmental
damage for additional profits. Example – MNC can reduce expenses by not
taking proper precautions to stop pollution.

(2) Increases competition

Another disadvantage of multinationals corporations is Increases
competition in a market. MNC has the ability to Increase Competition. These
large corporations can easily dominate the market due to better products and
lower prices because MNC has the financial resources to buy in bulk.

(3) Pressurize Governments

Multinational Corporation’s investment can be very important to a
country but this often gives an unbalanced influence over government and
other organizations in the host country. MNC economic importance in the host

39
country, it makes often that governments agree to changes that may not be
beneficial for the long-term welfare of their people.
(4) Uncertainty in jobs
The MNC can move or shift their production factory or offices in a
very short time. This creates uncertainty for the host country. If more
companies transfer their offices and centering operations, more jobs for the
people living in these countries are threatened.

(5) Reduces Tax Liability

Multinationals constantly aim to reduce their tax liability to a
minimum amount. This can be done with the help of transfer pricing. They
target to reduce their tax liability in countries with high tax rates and increase in
the countries with low tax rates.
MNC can do this by transferring components and part-finished
goods between different countries at different prices. If any country has high
tax rates, they transfer the goods at a relatively high price to make the costs
appear higher. This reduces their overall tax bill.

(6) Low-skilled employment

As multinational companies want to reach efficiency level quickly in
production, marketing, etc., to make this possible MNC needs skilled
employment. But MNC doesn’t have sufficient time to create local employment
skills that encourage high productivity levels.
In this situation, MNC starts to import skilled employment from
other countries to meet their needs. So the jobs created in the local area can
be low-skilled or lower level in multinational companies.

(7) Exploiting Workers

MNC often invests in developing countries to take advantage of
cheaper labor. Most multinational corporations prefer to put up branches in
these parts of the world where regulation and laws are not strict for workers
and where people need jobs because these multinationals demand cheaper
labor and lesser healthcare benefits.
(8) Export Profits
Another biggest disadvantage of MNC is exporting and transferring
their profits. Large multinational are likely to take profits back to their ‘ home
country ‘, leaving little financial benefits for the host country.

40
 (9) Impact on Societies
Large numbers of foreign businesses can remove local and traditional
cultures. These companies increase the culture of fast food and soft drinks in
developing nations.
For example – burger and coke, this type of food are not even good
for health but MNC like McDonald, Promoting the foreign culture.

(10) Inappropriate Technology

Another disadvantage of MNC is unsuitable Technology. The
technology given by MNC from their home country can be inappropriate for
host countries. It can be too old or too advanced. Moreover, we discussed
earlier MNC doesn’t have time to train local people to acquire skills in
technology.

41
 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 mobilized 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.

4.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’.

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
Arguments Against MNCs (The negative role)

There are several arguments against MNCs which are discuss

below.
1. Although MNCs provide capital, they may lower domestic savings and
investment rates by stifling competition through exclusive production

42
 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.
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.
5. MNCs’ impact on development is very uneven. In many situations MNCs
activities reinforce dualistic economic structures and widens 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.
6. MNCs typically produce inappropriate products and stimulate inappropriate
consumption patterns through advertising and their monopolistic market
power. Production is done with capital-intensive technique which is not
useful for labour surplus economies. This would aggravate the
unemployment problem in the host country.
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
43
 excessive protection, lower tax, subsidized inputs, cheap provision of
factory sites. As a result, the private profits of MNCs may exceed social
benefits.
9. Multinationals may damage the host countries by suppressing domestic
entrepreneurship through their superior knowledge, worldwide contacts, and
advertising skills. They drive out local competitors and inhibit the
emergence of smallscale enterprises.

EFFECTS OF COVID-19 ON
MULTINATIONAL CORPORATIONS IN INDIA

● The COVID-19 episode has just started to influence how financial

specialists carry on across economies, i.e., starting from the way of life
and socialization to monetary exercises of individuals and firms. The
financial effects of the new coronavirus ("COVID-19"), which arose in
Wuhan, China in December 2019 and spread to the world in a brief time
frame with the commitment of between reliance among nations, happen at
an exceptional level contrasting with emergencies experienced previously.

● The International Financial Market is where budgetary wealth is traded

among individuals (and between countries). It will, by and large, be viewed

as a wide blueprint of rules and establishments where resources are
exchanged between specialists in overabundance and managers in
insufficiency and where affiliations set out the standards. Also, found on
this market is a wide scope of widespread trade. Along these lines, this
market is a pointer to the money related turn of events. As of now daily of
COVID affects the everyday issue. A Multinational Corporation (MNC) is
an organization that works in its nation of origin, just as in different nations
around the planet. It keeps a focal office situated in one country, which
arranges the administration of all its different workplaces, like regulatory
branches or manufacturing plants. In the easiest structure, the
construction of worldwide undertakings is contained a parent organization
that holds all protected innovation rights, contract makers or undeniable
44
 makers which do the creative work in the nations with low work costs, and
the restricted or undeniable wholesalers that sell the completed
merchandise in different business sectors and behaviors market explores
in their nations of activity (contingent upon the conditions).

● The financial effects of the COVID-19 happen at an exceptional level

contrasting with the emergencies experienced previously. For some

businesses, both the store network has been hindered and client request
has contracted simultaneously. Restructurings and changes in transfer
pricing policies will be inescapable for the progression of organizations
and exercises since the COVID-19 emergency has caused an
unanticipated worldwide danger acknowledgment that couldn't be
anticipated when the intra-bunch legally binding connections were set up
and the gathering activity model was planned. Albeit the presence of
conditions that require the requirement for strategy changes is frequently
viewed as negative, it can likewise be transformed into a chance by
worldwide endeavors.

● Additionally, this reciprocal pressing factor contrasts from one industry to

another, yet besides from one country to another and even from one area
to another inside a similar country. Removed the common well being
impacts of local or worldwide arising and endemic irresistible disease,
occurrences spread more extensive financial results that win frequently
not mulled over in harm's way or impact examinations. The far-reaching
arrangement among financial specialists about the transnational money-
related shut down because of the sickness pandemic is perceived to be
the significant determinant of securities exchange instability that could
supervise the biggest financial exchange impact in the 21st century.
During the COVID-19 scourge, the whole world is going through on an
edge of affliction. As a result of this infection was massively destructive.
Every country has just embraced a technique to confine the stretch. A few
nations have endured safety measures through open separation
techniques, like shutting off scholarly associations, confining work, and
limiting the portability of individuals. These arraignments have had a fast
and significant impact on all economies around the world. The
45
 disintegration sought after because of reduced creation, the allowances in
particular administrations that need close human association, the
joblessness of workers because of this scourge, deterring numerous
organizations incidentally and endlessly brought about a tremendous
impact on the worldwide economy. The pandemics COVID-19 period has
annihilated the production network in the worldwide economy. This is
going on with both the nearby and worldwide business sectors. Worldwide
market harmony is a distant memory. The essential utilization of organic
market harmony is imbued into everyday activities whether somebody is a
rancher, drug producer, scholarly, or a buyer. Market interest is critical for
the economy since they influence the expenses of buyer items and
ventures inside an economy. As per the hypothesis of the market
economy, the association among market interests adjusts a point, which is
known as the harmony cost or market balance. Market balance is
something vital for the global economy. How a market works with the
standard market interest measure, it consequently will in general
accomplish the harmony in a point. Due to the worldwide pandemic,
supply is tremendously diminished where request generally stays as
before.

● The prudent exchange of everywhere in the world is influenced generally.

Coronavirus impact has now expanded past reasoning ability. This epic
pandemic caused the biggest misfortune in financial history. The
worldwide financial exchange has fallen. There is a deficiency of
merchandise, staple goods, medications, machines, and gadget pieces of
clothing items, food sources, oil, and so on in creation or an inventory
organization, the individuals who are working if one individual gets
influenced can without much of a stretch influence other.

● From a business perspective, there is a connection between each country

on the planet so the assets produced in one nation are provided to another
nation dependent on interest. The creation of merchandise has normally
declined because of the conclusion of plants, individuals' pay has gone
down because of the conclusion of the working area, because of which the
interest for the item has additionally diminished and the stockpile has
46
 halted. So unique organization halted their creation only hence and supply
moreover. They need to think often about their specialist's well being.
Worldwide security is likewise a major issue there. This contamination
affected worker's lost compensation and all buyers cut back on spending
and in like manner, the stockpile shock has incited a lot greater interest to
paralyze. This paper recreates the impacts of (COVID-19) on the interest
and supply of the global economy and how the decreasing popularity for
administrations occurred and the decrease in the inventory of items that
occurred due to joblessness and different aftermaths. It is anyway too
quick to even think about expecting the outcome of COVID-19 on the
Financial Management of MNCs (Multinational Corporations). The world
depends on a full measurable sign. It is hard to assess the results and the
aftermaths of the pestilence as it circles and to explicitly ascertain what
amount of time it will require countries to withdraw to normal monetary
movement.

Figure 1: - Global GDP growth, 1995–2020

47
 Figure 2 (A): - The Overall COVID-19 Impact on External Private
Finance in Developing Economies

Figure 3 (B): - The Overall COVID-19 Impact on External Private Finance

in Developing Economies
10.

48
LIMITATIONS OF
STUDY

49
 LIMITATIONS OF STUDY
1. The study is completely based on secondary data.

2. As the topic of this project is very vast it was difficult to cover all the aspects in
detail.

3. Due to time constraint, the primary research could not be conducted on this
topic.

4. As business intuition vary from company to company, their impact on the

institution cannot be generalized.

50
CONCLUSION AND
RECOMENDATION

51
 CONCLUSION AND RECOMENDATION

In a nutshell, the MNCs the world over are the recent craze. The world
economies both developed and developing are buzzing with the
activities of MNCs in a variety of ways e.g. FDl inflows and outflows,
M&A, joint venture, services etc. The investment flows have gone up
during the period under review. The International production has
expanded. Till the end of 1998, there were 53000 MNCs and 4.48,00 0
foreign affiliates which have played key role with $ 3.5 trillion,
accumulated stock of FDI, $9. 5 trillion, sales of foreign affiliates and $
13 trillion global assets. World wide cross border M&A mostly in
banking, insurance, chemical pharmaceuticals and telecommunication
valued to the tune of $ 236 billion speaks volume of globalization during
the current decade. Asian countries are hopefully the new destination
for the foreign investment in the form of FDI, joint venture, M&A and
financial services on account of vast size of the market, cheap
availability of skilled and unskilled labour, marketing incentives and
great deal of opportunity for induction of advance technology.
India has embarked upon the process of liberalization for globalization
of her economy in July 1991 , bringing about a host of economic
reforms, viz., and financial, fiscal, banking, insurance and capital
market. This liberalization programme is expected hopefully to pave
ways for easy and smooth integration of world economy with the Indian
economy.
The succeeding chapter entitled "Research Design and Methodology"
presents a comprehensive explanation pertaining to statement of
problems, review of literature, issues, scope, objectives and hypotheses
of the study.

52
BIBLIOGRAPHY

53
 BIBLIOGRAPHY

● https://www.gr8ambitionz.com/2016/12/Role-of-MNCs-in-india.html

● https://www.yourarticlelibrary.com/company/multinational-corporations-of-

indiacharacteristics-growth-and-criticisms/23462

● www.researchgate.com

● www.wiwpedia.com

● https://global.honda/about/profile.html

● https://www.bmwgroup.com/en/company/leadership-and-governance.html

● https://www.businessmanagementideas.com/management/

multinationalcorporation/multinational-corporation/21253

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