MNC may be defined as a company, which operates in number of countries and has production and service facilities outside the country of its origin. They are also called Trans National Company (TNC) Their activities have both good and bad impacts on the economy. They take decisions on a global context or basis. Their maximum profit objectives take no account of the reactions produced in the countries felling in their orbit. They operate in different institutional forms Some are: Subsidiaries companies wholly owned by MNC in other countries Subsidiary company enter into joint venture with a company another company Agreement among companies of different countries regarding production and discussion of market.
Role of MNC’s
1. Promotion of Foreign Investment:
MNCs can bridge the gap between the requirements of foreign capital for increasing foreign investment in India.The liberalized foreign investment pursued since 1991, allows MNCs to make investment in India subject to different ceilings fixed for different industries or projects.
2. Non-Debt Creating Capital inflows:
The direct foreign investment by multinational corporations represents non-debt creating capital inflows we can avoid the liability of debt-servicing payments. Moreover, the advantage of investment by MNCs lies in the fact that servicing of non-debt capital begins only when the MNC firm reaches the stage of making profits to repatriate Thus, MNCs can play an important role in reducing stress strains and on India’s balance of payments (BOP).
3. Technology Transfer:
Transfer high sophisticated technology to developing countries which are essential for raising productivity of working class and enable us to start new productive ventures requiring high technology is possible due to mnc’s. Whenever, multinational firms set up their subsidiary production units or joint-venture units, they not only import new equipment and machinery embodying new technology but also skills and technical know-how to use the new equipment and machinery.
4. Promotion of Exports:
With extensive links all over the world and producing products efficiently and therefore with lower costs multinationals can play a significant role in promoting exports of a country in which they invest.
5. Investment in Infrastructure:
With a large command over financial resources and their superior ability to raise resources both globally and inside India it is said that multinational corporations could invest in infrastructure such as power projects, modernisation of airports and posts, telecommunication.
The investment in infrastructure will give a boost to industrial growth and help in creating income and employment in the India economy. The external economies generated by investment in infrastructure by MNCs will therefore crowd in investment by the indigenous private sector and will therefore stimulate economic growth.