Can any body tell me what is the future of MNC's in India?

Question

Can any body tell me what is the future of MNC's in India?

Answer 1

MNC’s bullish on India - CII-A.T. Kearney survey

Almost 70% of Multinational Corporates (MNCs) participating in the first "CII-A.T. Kearney MNC Survey 2007" have evinced a ‘high likelihood’ of making additional medium and long-term investments in India. The investment outlook in the medium term appears not to be dictated by their current performance in India, with most companies indicating a medium to high likelihood of investment, irrespective of performance.

Further, three out of every four MNCs state that their performance in India has met or exceeded internal targets and expectations. Tailoring products and prices to suit Indian tastes, appointing local leadership and indigenisation are key factors for success in India, in their experience.

However, organisations reiterate that, in the future, a greater emphasis on leveraging India’s cost-competitiveness for exports and strengthening penetration into tier-II cities would be crucial to maintain the growth momentum. There is also a clear co-relation between a positive perception of performance and the time that the MNC entity has been operating in India. This suggests a significant learning curve for MNCs doing business in India.

This is the conclusion of a study conducted by global management consulting firm A.T. Kearney. The Confederation of Indian Industry-A.T. Kearney MNC Survey 2005," involves MNCs from a cross section of sectors and leverages the findings of A.T. Kearney’s annual Global FDI Confidence Index®.

The ‘CII-A.T. Kearney MNC Survey 2005’ was conducted

Capture inputs from MNCs on their own performance and the winning strategies for India.

Assess investment outlook within the MNC community and key drivers of the outlook.

Understand the perception of India vis-à-vis other economies, in the context of multi-country operations.

Identify action steps required, which would significantly impact the overall outlook of MNCs.

The survey was conducted on a small scale to begin with and the findings are meant to be a thought starter for a larger ongoing initiative.

Survey findings indicate that in a comparison with other emerging Asian economies (China, Malaysia, Thailand, and Philippines), India is perceived to be at par in terms of FDI attractiveness, even though current performance of MNCs in India compares favourably (i.e. Indian operations are perceived to perform better than those in most other SE Asian countries). While more than three-quarters of the survey respondents ranked India higher than Malaysia, Thailand, and Philippines in terms of MNC performance, they were more conservative in their outlook on India’s FDI attractiveness relative to these economies.

India’s market potential, labour competitiveness, and macro-economic stability were unanimously highlighted as the key drivers of FDI attractiveness.

Global investors view India and China as two distinct markets

In comparison to China, close to 50% of the survey respondents believed that India is at par or better than China in terms of MNC performance. However, about 75% of respondents viewed India unfavourably as compared to China on FDI attractiveness.

Investors favour China over India for its market size, access to export markets, government incentives, favourable cost structure, infrastructure, and macroeconomic climate. The same investors cite India’s highly educated workforce, management talent, rule of law, transparency, cultural affinity, and regulatory environment as more favourable than what China presents. Moreover, they maintain that China leads in manufacturing and assembly, while India leads for IT, business processing, and R&D investments.

A key take-away from the study is that while India will attract global investor interest due to the sheer size of its economy, there is much more to be done to become more investor friendly and maintain investor interest. Respondents put forth that bureaucracy, lack of infrastructure, and an ambiguous policy framework are specific challenges that adversely impact MNCs operating in India and influence perception of India vis-à-vis other emerging economies.

There was consensus amongst the MNC participants that the government needs to rationalise policies (i.e. rationalise tax structure, reduce trade barriers); Invest in infrastructure - physical and information technology and; Accelerate reforms (political reforms to improve stability, privatisation and deregulation, labour reforms), which in turn would help in accelerating additional investments.

Answer 2

Bright, Bullish and Encouraging.*