Performance of Indian private companies and multi-national companies post liberalization - a comparative study

Abstract

1991 was a period of great upheaval in the Indian economy. Finding itself in a tight spot and because of its commitment to international monetary agencies, the country rushed headlong into liberalization. In just 31 days in the month of July, old barriers were broken, licence-raj was almost done away with and the economy opened to entry and investment by MNCs. Questions were being raised about the survivability and ability of Indian Companies to compete with large Multi-National companies in these conditions. We have come a long way in the last fifteen years since then. It would be interesting to now look back and see how the story got played between these two sets of companies. Our analysis clearly states that Multi-National Companies, as a unit of analysis, outperformed Indian Companies. However, this difference in performance cannot be attributed to the advantages of abundant low-cost capital or to parent competencies; but to the choice of industry that these two sets were in. A comparatively larger number of MNCs were present in Non-Capital Intensive industries and even within Capital Intensive Industries were primarily in the Capital Goods Industry. On the other hand, Indian companies had a significantly larger presence in Capital Intensive Industries (with sizeable presence in sectors like Iron, Cement, etc) and in White-Goods and small capital goods in Non-Capital Intensive Industries (see table above). The difference in performance can thus be traced to the inherent nature of these businesses. 215 FMCG Pharma White Goods 1 3.8% 13 50.0% 12 46.2% 21 44.7% Multi- National (Foreign) Companies 47 18