GLOBALISATION AND MNCs – ONLY ABOUT ECONOMIC DRIVERS?

Globalisation and MNCs have contributed substantially to the growth of business and improvement of economic prosperity in India.

MANUFACTURING:

  • India had adopted Nehruvian socialist model with public sector in the ‘commanding heights ‘ of economy  for almost 45 years after independence. With narrow focus of industrialization( predominantly Steel, Aluminum, Petroleum refining and FMCG) targeted at domestic consumption, they reflected LOW PRDUCTIVITY, rampant corruption and sloppy pace of growth.
  • Many state run industries were running like monopolies and customers had no choice owing to huge duties imposed on imports.
    This resulted in far less focus on Training of engineers and managers since there was no motivation.
  • Post-1991, after economy was liberalized,  manufacturing has got substantially diversified into broad-based covering both capital goods, consumer durables, pharma, automobiles  computer hardware and ancillary industries.

SERVICE SECTOR:

  • Service sector’s contribution to GDP has grown from 45 % to 60 % during 25 years of post-liberalisation.
  • Impact on Local business: A mixed bag, we can say . While a few user industries got  benefitted, those who were not able to focus on  Economic drivers towards cost-competitiveness  either fell along way or got taken over by peers or overseas MNCs.
  • Even today, many brick and mortar Cos ( commodity producers with large capital investment) are found to be struggling due to onslaught of ‘dumping’ from other countries.

PROSPERITY:

Per World Bank Classification, India moved up from ‘Low Income’ Country to ‘Lower Middle Income’ country. Though India still has about 30 % of global poor, some distance has been covered.

BROAD PICTURE

1991 2016 REMARKS
Market Cap of Listed cos in BSE ( lacs of Rs Cr) 1.1 150
No. of Foreign Cos 500 3000+
FDI ($US Billion) 5 40
Total Trade (lacs of Rs Cr) <1 >32 Sum of Imports and Exports
Forex  Reserve  ($US Billion) 6 360
GDP (lacs of Rs Cr) 5.8 135 Growth  escalated from < 5 % to 7- 9%
Per capita Income  Rs /Annum 6270 100000
Per capita Electricity Consumption, kWh Per Annum 300 800
Forex Reserve offests (in terms of Months of Import 1 10 Indicates strength of currency against  potential global  event
Inflation (%) 10 6
Production of steel , MTPA 14 65

 IMPACT ON EMPLOYMENT – Professionals

Both by way of number and business volume has acted as a catalyst towards movement of top level professionals –both out-bound and in-bound.

As more and more MNCs established business and increased the scale of operations, they recruited grads coming out of India’s premier educational institutions like IITs/NITs& IIMs.

When they found the quality of captive recruits matching or sometimes superiors to the counterparts from their home countries, the native recruits started getting global corporate level assignments.
One positive rub-off effect was the realization for upskilling by TRAINING, especially for Engineers and Managers

IMPACT ON BUSINESS PROCESS

Globalisation in general and MNCs in particular have contributed to transformational shift in the way business is being done in India.

The prime catalysts has been use of Information Technology across business sectors. This was partly propelled by the strong and cost-effective captive IT industry.

Commencing with movement of routine chores earlier, of late, even ‘intelligent’ professions (eg: determining loan eligibility by using Business Intelligence tools) is being taken over by machines.

Business tools like ERP, SCM, CRMetc have become now essential for sustaining the business of even middle level organisations.

Of course this also called for significant training of employees for getting them accustomed with the new processes being introduced.

Artificial Intelligence tools like robotics are extensively used in some sectors needing repetitive logistical related chores.

Indian Companies have now started benchmarking themselves with their overseas ( advanced economies) counterparts in respect of productivity.

As per this year’s recent World Economic Forum report, India has leapfrogged 16 places in Global Business Competitiveness Index and is currently in 2nd place amongst BRICS nations.

TRANSCENDING ECONOMICS

Transcending Economics

ENVORONMENT:

In the formative years of MNCs in India, hardly any attention was paid to the pollution of the local environment caused due to the industries’ owners. Part of the reason was the relatively high cost of treatment of effluents discharged, the other part being blurred regulatory laws.

In general, MNCs took advantage of the lack of awareness among local community and spent bare minimum on abatement of environmental pollution.

A case in point is the Union carbide accident in 1984.

Though this incident forced the MNCs to be sensitive towards more focus on HSE ( Health, Safety and Environment) aspects, it took still so many years for tangible improvement.

However, during the past decades, availability of of information on global benchmarks and arrival of civic-sensitive local NGOs forced regulators to adopt stringent rules concerning environmental protection.

Norms being set forth by funding agencies like IBRD, ADB etc  also accentuated migration towards more stringent norms.

At present, a number of conditions precedents on environmental matters need to be complied with before any industry ( including those by MNCs) commences operations

PROJECTION OF SOFT POWER

Recently however, the number of MNC families in India- especially those from countries like Japan, S. Korea, Germany and UK have  substantial presence in the country and they involve themselves with local communities for better understanding of local cultures and attempt to integrate.

It appears that presence of a large number of MNCs and virtual integration of India’s economy with the rest of the world has significantly improved India’s ‘soft power’ across the globe – perhaps best corroborated by UN general assembly last year passing a resolution declaring June 21 as International Yoga day !

Now a number of Yoga practitioners from India are gainfully employed at overseas locations for training of local community.

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