MULTINATIONAL CORPORATIONS #4 - Dominations of MNC's Dominations of MNCs over Indian Economy Dominance of MNC’s Worldwide Recent Trends in MNC

1. Sundar B. N.
Assistant Professor

2. Dominations of MNCs over Indian Economy
• At present Multinational Corporations are having a stronghold over the
Indian economy. Even during 1970s, i.e. by two decades ago about 53.7 per
cent of the total assets of the giant sector were controlled by the MNCs.
• As per the estimates of the Industrial Licensing Policy Inquiry Committee,
in 1966, there were about 112 MNCs operating in India with assets worth
Rs. 10 crore or more.
• Out of these companies, 48 were either foreign branches or Indian
subsidiaries of foreign companies.
• Besides, there were 14 other companies, having heavy loans and equity
capital, which were almost controlled by foreign companies. Thus these
62 companies had nearly Rs. 1,370 crore worth of assets which jointly
constituted about 54 per cent of the total assets of the giant sector
operating in India.
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3. Dominations of MNCs over Indian Economy
• D.S. Swamy was of the opinion that a good number of other
companies were also under foreign domination and some of these
companies were depending heavily on international financial
institutions for financial assistance. Thus during the mid-1960s,
Western foreign capital mostly dominated the big business of the
country and thereby controlled the apex of India’s industrial
pyramid.
• Another important feature of MNCs in India is that they have been
raising a major part of investment resources within the boundary
of Indian economy. Sudip Choudhury made a study on the source
of finance of MNCs during the period 1956 to 1975 by taking sample
of 50 largest foreign subsidiaries.
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4. Dominations of MNCs over Indian Economy
● The study revealed that out of the total financial resources of these
companies only 5.4 per cent were contributed by foreign sources
(equity capital and loans) and the remaining 94.6 per cent were
contributed by domestic sources. Another study made by John
Martinussen revealed that amount of capital issues contributed by
foreign participation declined from 61.5 per cent all consent of public
limited companies in 1976 to only 29.5 per cent in 1980.
● Moreover, about 20 TNCs affiliated Companies also reduced their
foreign funding. During the period 1972 to 1983, some of these
companies did not obtain any foreign funds. Thus in reality, the MNCs
mostly collect their capital from within the country and repatriate a
big chunk of their profits to their parent countries.
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5. Dominance of MNC’s Worldwide
 The economic dominance of the multinationals is manifested by the fact that the
MNCs control between a quarter and a third of all world production and the total
sales of their foreign affiliates is about the same as the gross national product of all
developing countries excluding oil exporting developing countries.
 The economic reform ushered in the developing countries, particularly the
liberalisation of foreign investment and privatization, might have given a boost to the
FDI in these countries.
 In the case of the DCs, the investment and employment created by the MNCs have
been chiefly concentrated in about a dozen of the nations; China, Brazil, Mexico, Hong
Kong, the Philippines, Singapore, India, Taiwan, Indonesia and South Korea
accounting for a major share.
 The value added to all foreign affiliates of MNC’s as a percentage of world GDP
increased from 5% in the beginning of the 1980s to nearly 10% at the end of the last
decade.
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6. Dominance of MNC’s
 As the Brandt Commission observes, foreign investment has moved to a limited
number of developing countries, mainly those which could offer political stability
and the economic clout of the MNCs is indicated by the fact that the GDP of most of
the countries is smaller than the value of the annual sales turnover of the
multinational giants.
 In 1997, the value of the sales of the US multinational, General Motors, the biggest
multinational in terms of sales turnover, was $ 178. 2 billion. Of the total 101
developing countries with a population of more than one million each, listed by
the World Development Report, only nine countries ( India, China, Mexico,
Argentina, Indonesia, Turkey, Brazil, Russia and S. Korea) had a GDP which was
more than this figure.
 There were also several developed countries whose value of GDP was less than
this. It may be noted that in 1997 India's GDP was only $359. 8 billion
 MNC’s foreign affiliates now account for 1/10 of world GDP and 1/3 of world
exports In 1999 6

7. Dominance of MNC’s
 Due to the differences in the definition adopted, the estimates of the numbers of MNCs also
vary. According to the United Nations' World Investment Report 998, there were more than 53,
000 TNCs, which had more than 4, 50, 000 affiliates,
 The United States and Europe are the homes for most of the MNCs. Their shares have, however,
been declining because of the growth of MNCs in other regions, Japanese MNCs have made
rapid strides in the 1970 s and 1980 s. In 1991, majority of the 10 largest multinationals (in terms
of sales) were Japanese.
 Multinationals from developing countries such as S. Korea and Taiwan have also been making
their presence increasingly felt.
 Of 50 largest economies, 14 were TNC and 36 were countries
 Sales of foreign affiliates world wide $33 Trillion in 2010 and $3 trillion in 1980
 GDP of most of the countries is smaller than some MNC giants annual sales volume
1) In 2021 Wal-Mart stores revenue $559.2bn whereas Norway GDP $ 445.51bn
2) Royal Dutch/Shell group revenue $ 268,690mn whereas South Africa GDP $ 213,100mn
3) General Motors Revenue $ 193,517mn whereas Nigeria GDP $71,318mn
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11. Recent Trends in MNC
 Increasing emphasis on market forces and a growing role for
the private sector in nearly all developing countries.
 Rapidly changing technologies that are transforming the
nature of organization and location of international
production.
 The globalization of firms and industries.
 The rise of services to constitute the largest single sector in
the world economy.
 Regional economic integration, which involves both the worlds
largest economies and selected developing countries.
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