FACTORS

ATTRACTING MNCs
IN INDIA

 "Indias 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 inhouse 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.

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.
Multinational corporations (MNC) are often
divided into three broad groups:-

TYPE OF MNCs:-

 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.