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Role of MNCs in India’s Economic Development: An Assessment

A Sangamithra

Introduction

The present vehicle of economic domination by the North of the South is the multinational corporation. The growth and development of MNCs had far-reaching effects and consequences extending not merely to the business and trading but also affecting the social, political, economic and cultural life of the people of a country where in these companies are operating.

MNCs in India: Positive Aspects

As one of the major important nation of the developing countries, India has special interest to foreign investors, first and very early to traders, and more recently to industrial investors.

The large Indian consumer market, representing one fifths of the worlds population, together with its low cost of production are powerful forces attracting foreigh MNCs into India. Foreign MNCs are to day accessing the Indian market both through strategic alliances with Indian companies, who understand the Indian companies better as well as through direct 100 per cent investment into India. Foreign MNCs bring in technology and capital. They have immense capability of value addition in a very short span of time.

India at this stage needs foreign capital, technology and linkage to overseas markets to take a quantum leap forward. MNCs with their capital, technology and brands have a crucial role to play in India’s economic growth and are currently being invited into India in the liberalised policy frame work. Besides the direct technology and capital infusion, ancillary and small business will also benefit more rapidly with the entry of foreign companies, enhancing value addition to the Indian economy.

Foreign MNCs initially attracted by the huge Indian consumer market. The low cost advantage that goes with this attraction made India a preferred production centre. Gradual exports from such facilities to global markets then serve the useful purpose of invigorating the Indian economy.

MNCs: Negative Aspects

There has been very little trasfer by MNCs have thrived essentially by generation of capital through profitable exploitation of Indian labour and skills and repetitive imports of technology from those principals at a heavy cost to India. Technology brought as part of DFI is not transferred to local business or industrial enterprise. It also designed to maximise profits for the foreign investor.

The government policy by and large seems to be moving in the right direction. The only criticism, which is valid against the government is that, it is recklessly entering into foreign collaborations even in areas where domestic capabilities have been sufficiently developed.

In post-independence India, with our emphasis on self-reliance, every single project was designed and built exclusively by Indian engineers. Now even small projects are completely handled by foreigners. This would result in the development of a dependency syndrome.

Global investors are very keen to enter areas, which promise quick returns and high profit with short gestation period. This explains the rush and pressure in these areas.

India does not seem to realise that globalisation does not mean free imports or free flow of foreign investment. This may lead to domination by the multinationals through fierce competition supported by highly pressurised advertisements of their brands.

Concluding Remarks

To sum up, the open door policy of the Government of India to woo foreign capital and permit its entry in all kinds of areas - priority or non-priority - is not in the interests of the nation. it must ensure that wherever domestic capabilities are altready developed and are under utilised, the free flow of direct foreign investment in the consumer goods sector is inconsistent with our industrial policy. Such a policy goes against the spirit of Swadeshi, which is the pillar for attaining economic self-reliance. The government should, work out a selective approach towards foreign investment.