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Multinationals and liberalization UPSC | Industry | Geography of India

Before 1991, there was a limited choice for Indian consumers for various goods and services. 
  • For example, only Ambassador and fiat were automobile choices for the Indian consumers, but nowadays each year, new car models are seen in the Indian market. 
  • Similar to all other brands from shirts to television is in the Indian market. 
  • These all happened after the new industrial policies and liberalization. 

Liberalization means removing trade barriers or restrictions by the government. Under the liberalization the following steps were taken by the government: 
Under liberalization; policies were introduced to end the restriction. 
The following are major policies under liberalization:
Deregulation of Industrial Sectors 
Financial Sector Reforms
Tax reforms 
Foreign Exchanges reforms 
rade and Investment Policy reforms
We have already discussed this in detail in the previous article, for more detail, please refer, to Liberalization

Liberalization policies were favored by developed countries under WTO. 
Role of WTO-World Trade Organization in the liberalization; 

 The main aim is to eliminate the trade barrier among countries in all forms. It started and was initiated by developed countries. In practice, developing countries unfairly retain trade barriers and forced developing countries to remove trade barriers. 
For example, Agriculture Products; 
  • In the USA; 
  • Agriculture; Share to GDP-1% 
  • Employment-0.5 % 
  • Formers get a massive amount of money from the US government for production and export. 
  • USA farmer sells agriculture products at a very low price and adversely affects developing countries including India. 
Liberalization leads to globalization; countries' economies are closing each other and MNCs are integrating the world economy together. 

 MNC( Multinational Corporation):
 MNC is a company that operates and does production in more than one country. 
MNC choose office and production factories where they get cheap productional costs. 

Preferable location of MNC; 
  • Closeness to market 
  • Skilled and unskilled labor available at a low cost 
  • Favorable government policies

For example, 
  • Many companies from the USA and Europe shifted to China, Mexico, Eastern Europe, and India because; 
  • China provides cheap manufacturing facilities Mexico and Eastern Europe are cheap locations and proximity to the market such as the USA and Europe. 
  • India has highly skilled English speaker labor; is available at a cheap cost. 
Investment is done by MNC in two forms; 
  • Green Field project 
  • Brownfield project 

Green filed a project: 
Investment has done by MNC in the form of the following forms; 
  • Land 
  • Building 
  • Machine 
  • other-equipment

Brownfield project: 
In the following forms; 

Jointly venture; 
MNC jointly set up production with local companies, investment is done in the form of : 
Additional investment in buying a new machine 
Provide the latest technology for production 

Acquisition of local companies: 
Buy up local companies and expand production. 
For example, Cargill foods company is a very large MNC company in America;
 the company acquired Prakash foods(an Indian company), and now Cargill is now the largest producer of edible oil in India. 

Large MNC has tremendous power to determine price-quality, delivery, and labor condition. Production of dispersed locations is getting interlinked. 
MNC are playing a major role in the globalization process and development in developing countries. 

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