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IMPACT OF MNCs ON

DEVELOPING COUNTRIES

Introduction:

Multinational corporation (or transnational corporation) (MNC/TNC) is a corporation or enterprise that

manages production establishments or delivers services in at least two countries. Very large

multinationals have budgets that exceed those of many countries. Multinational corporations can have a

powerful influence in international relations and local economies. Multinational corporations play an

important role in globalization; some argue that a new form of MNC is evolving in response to

globalization: the globally integrated enterprise.

MNCs are not new in India if we look in the past British East India Company and Dutch East India

companies were there which came to India for trade and by taking advantage of political conditions of

India gained power. After adopting new economic policy by government of India in July 1991 many

MNCs came in the Indian economic scene because the government of India gave many incentives to the

foreign investors. So it is clear that government opened the doors of Indian market to MNCs .Now the

question is how the MNCs are affecting Indian economy whether they are useful for our economy or

not? Let us analyze some brief impacts of MNCs on different sectors of the economy.

MNCs and Indian Industries:

Some economists think that MNCs are helpful for Indian industrial sector they think that Indian

companies learn new technique of production and new management techniques with the arrival of

MNCs in the Indian economic scene. MNCs increase competition in the industrial sector so when Indian

companies compete with global giants they also improve in their working. With the entrance of MNCs in

India demand for skilled persons increased to a great extent so more and more people are becoming

skillful and the problem of skilled persons is solved for Indian industries also. MNCs also bring foreign

capital in the country, which help to expand the market and Indian industries also take benefit of it.

There are some economists who have some different opinion according to them the technology

transferred by them is not useful for countries like India because MNCs use capital intensive technique

and developing countries have scarce capital and labour abundant so the technology they transfer is of

little use. The competition increased by MNCs is also disastrous for domestic industries only few strong

domestic industries have enough strength to face the competition with global giants. As well as skilled

persons are concerned MNCs give higher salaries to the skilled persons and thus able to explore the

services of the most skilled persons and the Indian industries are still out of the services of these skilled

people. No doubt MNCs bring foreign capital in India but this capital later becomes the cause of

reimbursement of profit to the MNCs parent countries, which cause capital flight from the country.

MNCs and agriculture:

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Indian economy is an agrarian economy; a major part of the population depends on agriculture directly

or indirectly. If we go back to past few decades Indian agriculture was considered backward but now the

time is changing and MNCs such as Mahyco-Monsanto help in modernizing Indian agriculture. They

provide modern agricultural inputs such as HYV seeds, pesticides, fertilizers and modern agricultural

equipments to the Indian farmers and thus Indian agriculture has turned itself from subsistence level to

making profits. MNCs also encourage research activities in the field of agriculture in developing

countries like India.

If we see the other part of the picture India with bill ion plus population, has put agriculture at the heart

of its economy and food security at the center of its agriculture policy. In developing countries, MNCs

encourage commercial farming because they need cheap raw material. Farmers also get good amount

for their crop so the result is danger of food security, which the world is facing these days. A big number

of Indian farmers are small and medium farmers who are not able to use expensive agricultural

equipments so the gap is widening among rich and poor farmers, which is disastrous for the agriculture.

Moreover MNCs are making Indian farmers dependent on HYV seeds provided by them and thus the

biodiversity of Indian varieties are in danger.

MNCs from social and moral viewpoint:

MNCs are not fair in their working in the developing countries. Many MNCs are not paying their tax

liability, they prefer to establish in that country where tax laws are not strict similarly they prefer to

establish in that country where environmental laws are also not much strict and these are mainly

developing countries. They even send their toxic waste in these countries by taking advantage of loose

environmental laws even the quality of their products vary with country to country we can take the

example of coca cola which is of superior quality in USA and is of inferior in India. MNCs also responsible

for misallocation of resources in the developing countries. They provide mainly luxurious products

because there is more profit in it. Thus demand for these products increase due to demonstration effect

and this leads to misallocation of resources towards luxurious goods but the need of developing

countries is to produce more and more necessary goods because most of the people belong to poor or

middle class.

Another aspect, which judges MNCs morally, is political interference. Generally it is the practice of MNCs

to gain the economic power in developing countries and then get political power by giving help to the

politicians at the time of elections and then manipulate industrial policies in their favor they also

interfere in the important political matters of these countries which can cause a big danger to the

sovereignty of developing countries.

Conclusion:

After discussing various aspects of MNCs in developing country like India the big question before us is

whether MNCs play positive or negative role in developing countries? Generally the governments of

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developing countries dont keep control on the working of MNCs, which is major fault on their side.

MNCs can be helpful for developing countries only when they are kept under control. We should not

give incentives to the MNCs only because they are coming from some powerful advanced countries. So

MNCs should face same rules and regulations as the domestic industries of the developing countries are

facing.