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.
10
9.2
9 8.5 9.1

8 7.1 8.4
6.7
6.5
7 6 7.5
5.8 7.4
6 5.3
6.1
5
4 4.8
4.4 4.4
3 3.8

2 2.9 GDP Growth

1 Mfg Growth

0
-98

-99

-01

-04

-05

-06
-02

-03
-00
97

98

00

03

04

05
01

02
99
%
19

19

20

20

20

20

20

20
19
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.