The process of liberalization has brought about significant transformations in the Indian business landscape, particularly affecting companies owned by Indians. With the opening up of the economy, Indian enterprises have been exposed to heightened competition, both domestically and internationally. This has compelled them to adapt and innovate in order to remain competitive. While some Indian companies have successfully capitalized on liberalization by expanding their operations, accessing global markets, and embracing advanced technologies, others have struggled to keep pace with the aggressive strategies and resources of multinational corporations (MNCs). Despite notable advancements, challenges persist in terms of infrastructure, regulatory bottlenecks, and access to capital, hindering the ability of Indian companies to compete satisfactorily with MNCs. This essay will delve into the multifaceted impact of liberalization on Indian-owned companies, analyzing their competitive strengths and weaknesses in comparison to MNCs and assessing the overall landscape of economic liberalization in India.
Tag: Effects of liberalization of the economy, changes in industrial policy, and their effects of industrial growth.
Decoding the Question:
- In the Introduction try to define the meaning of liberalization:
- In Body,
- Do scrutiny of impacts of liberalization (Write both positive and negative impacts but keep more focus on positive outcomes).
- In the second part, you need to discuss whether they are competing with MNCs satisfactorily.
- Try to conclude the answer by underlining the need for improvement in corporate governance especially in Indian corporates.
Answer:
In Economic terms, Liberalization means minimizing government restrictions and all types of regulations. This deregularization of the economy and opening of all the sectors, except few national significance sectors like nuclear energy and railways, are opened up for the private sector. This brings many advantages for the country in general and the corporate sector in particular, both private and public sector companies.
Positive impacts on Indian companies:
- Impact on Small Industries: Indian manufacturing industries are dominated by Micro, Small, and Medium enterprises. After following up on liberalization policy this sector has seen some technological advancement and become supplementary industries for big industries.
- Unrestrictive Capital Flow: This unrestricted flow of capital in the country brought much-needed capital for expansion and technology adoption. Newer technology adoptions and capital investment improved manufacturing sector output.
- Growth of Service Industry: New Economic policies brought the biggest thrust to the growth of the service industry. Many private firms from abroad and India got opportunities and incentives to start a business in the service sector like Information Technology, software companies, etc.
- Tourism Industry: Liberalization policy allowed and attracted foreign tourists to visit India. This visit and the popularity of India among foreign tourists have increased manifold. This growth gives a boost to the tourism sector.
- Impact on Agriculture Sector: In the agricultural sector, modern equipment-making companies were established in India which brought down the cost of these equipment and decreased the input cost of agriculture.
- Outsourcing: Knowledge Processing Organisations (KPO’s), Business Processing Outsourcing (BPO’s), and other cheap and effective service industry, human resources are now outsourced by foreign companies.
- Improved Ease of Doing Business: NEP has drastically reduced bureaucratic hurdles in the form of license raj, permit system, over bureaucratic control, etc. This has been a major reason behind the growth of companies in India in the first generation of economic reforms. Removing the Restrictive Trade Practices Act is an example of removing over control of Government.
- IT Sector: Many IT sector companies are successfully competing with global giants. Now India is considered as the Silicon Valley of the east. Companies like TCS, Infosys, etc are known for their global presence and competence.
- Automobile: The automobile sector is another sector where Indian brands are considered the best options for foreign car brands. TATA Motors, Maruti Suzuki, Mahindra, and Mahindra, etc. are Indian Giants in the automobile sector. Even Tata Motors has acquired British carmaker Jaguar Land Rover company and become one of the biggest companies of the world in the automobile industry.
- Oil and Gas Exploration: Indian giants like ONGC, Reliance petroleum, Gas Authority of India Limited (GAIL). Are now global giants in oil and gas exploration and even in the supply and processing sector. They are one of the major competitors in oil and gas exploration.
Negative impacts have also been witnessed in Indian Industries, such as:
- Sudden Competition: The sudden opening of the Indian economy and liberalized policy had negatively impacted Indian companies as they are facing tough competition from MNCs.
- Impact on MSMEs: Impact on SMEs can be widely discussed as this is the sector that received relatively fewer advantages but got higher disadvantages. As most of the investment and capital come in big corporates and sectors but not given much focus on the modernization of MSME.
- Agriculture Sector: Agriculture sector sees monopolization in seeds, fertilizers, chemicals, and even duplicate seeds and costly inputs like HYV seeds, herbicides, fungicides, etc. This resulted in the exposure of Indian farmers to increased input costs and a higher level of investment for agricultural operations.
- Unequal Competition: Some companies are not able to compete with foreign companies or MNCs which further leads to a monopoly in the market in which consumers and other companies suffer.
- Commercialization of Some Sectors: sectors like education, health, and higher education have seen trends of commercialization which are again becoming costly for the general public, and only wealthy people can afford quality education, health care, etc.
However, Indian corporates and companies are suffering from poor corporate governance, as corporate governance is widely discussed in India and abroad concerning Indian companies. Indian companies need to improve corporate governance and try to invest more in R&D so that technological advancement can make Indian companies in every field a competitor.
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