FACTORS ATTRACTING MNCs IN INDIA

"India’s computer scientists are among the leaders of

companies worldwide." Bill Gates, Chairman, Microsoft Corporation

“In this century India's economy will be larger than the United States.“

Bill Clinton, Former President of the United States

OTHER FACTORS:

Economic Liberalization

The Economic Policy Reforms

The Indian Innovation System after 1991

Government Support for Technological Innovation

Geographical Clustering

GOVERNMENT SUPPORT:

Both revenue and capital expenditure on R&D are 100% deductible from taxable income under the Income Tax Act.

A weighted tax deduction of 125% is allowed for sponsored research in approved national laboratories and institutions of higher technical education.

A weighted tax deduction of 150% is allowed on R&D expenditure by companies in government-approved in-house R&D centres in selected industries.

A company whose principal objective is research and development is exempt from income tax for ten years from its inception. Accelerated depreciation is allowed for investment in plant and machinery made on the basis of indigenous technology.

Customs and excise duty exemptions for capital equipments and consumables required for R&D.

Excise duty exemption for three years on goods designed and

developed by a wholly owned Indian company and patented in any two countries out of: India, the United States, Japan and any country of the European Union.

9.1

8.4

7.5

8.5

3.8

5.8

4.4

6.1

6.5

4.8

9.2

7.46

2.9

5.3

7.1

4.4

6.7

0

1

2

3

4

5

6

7

8

9

10%

GDP Growth

Mfg Growth

Multinational Corporations

Multinational corporation (MNC) or transnational corporation (TNC) or multinational enterprise (MNE) or multinational organization (MNO)

It is a corporation/business entity/enterprise that manages production establishments or delivers services in at least two countries.

TYPE OF MNCs:- Multinational corporations (MNC) are often divided into three broad groups:-

Horizontally integrated multinational corporations Vertically integrated multinational corporations Diversified multinational corporations

Multinationals have played an important role in globalization. Given their international reach and mobility, many countries, and sometimes regions within countries, sometimes compete with each other to have MNCs locate their facilities (and subsequent tax revenue, employment, and economic activity) within.

Facts on India WHAT INDIA OFFERS

One billion plus population India ranked 10th largest economy, 4th largest in terms of

Purchasing Power Parity 250-300 million middle class Gross Domestic Product (GDP) growing at over 8-9 %, makes

it one of the fastest growing economies in the world Lucrative and diverse opportunities for U.S. exporters with the

right products or services Easier access to capital

Facts on India WHAT INDIA OFFERS

One billion plus population India ranked 10th largest economy, 4th largest in terms of

Purchasing Power Parity 250-300 million middle class Gross Domestic Product (GDP) growing at over 8-9 %, makes

it one of the fastest growing economies in the world Lucrative and diverse opportunities for U.S. exporters with the

right products or services Easier access to capital

POLICIES THAT HELPED MNCs GROW IN INDIA

FDI Policy: Most sectors including manufacturing activities permitted 100% FDI under automatic route (No prior approval required)

Industrial Licensing : Licensing limited to only 5 sectors (security, public health & safety considerations)

Exchange Control: All investments are on repatriation basis. Original investment, profits and dividend can be freely

repatriated Taxation: Companies incorporated in India treated as Indian

companies for taxation Convention on Avoidance of Double Taxation with 71 countries

including Korea

CONCLUSION:

The first Vice Chairman of TCS, while delivering a speech at the CII symposium in 1974 said, “Unfortunately India could never participate in the industrial revolution because it lacked financial capital. But, 20 years from now, there will be a knowledge revolution in the world and India will participate in it because India has the highest knowledge density in the world and it is for companies to harness this knowledge capital and make Indians leaders in the knowledge revolution.”

'Multinational Companies in India' But, the scenario for 'MNC in India' has changed a lot in recent years, since more and more firms from European Union like Britain, Italy, France, Germany, Netherlands, Finland, Belgium etc have outsourced their work to India. Finnish mobile handset manufacturing giant Nokia has the second largest base in India. British Petroleum and Vodafone (to start operation soon) represents the British.Automobile companies like Fiat, Ford Motors, Piaggio etc from Italy have opened shop in India with R&D wing attached. French Heavy Engineering major Alstom and Pharma major Sanofi Aventis is one of the earliest entrant in the scene and is expanding very fast.

Oil companies, Infrastructure builders from Middle East are also flocking in India to catch the boom. South Korean electronics giants Samsung and LG Electronics and small and mid-segment car major Hyundai Motors are doing excellent business and using India as a hub for global delivery. Japan is also not far behind with host of electronics and automobiles shops. Companies like Singtel of Singapore and Malaysian giant Salem Group are showing huge interest for investment.