Indian Government Policies and Their Effects on MNCs Operations

This report analyzes the impact of various Indian government policies on multinational companies (MNCs) operating within the country. It explores policies such as regulatory reforms aimed at streamlining business incorporation, high taxation policies, and import bans on certain goods like diesel cars. The report also examines the equalization levy and its effect on MNC revenues. The analysis considers both positive and negative impacts, including how these policies influence MNCs' economic contributions, relationships with the government, and overall business environment. The report references several academic sources to support its findings and provides insights into the complex interplay between government regulations and the operations of multinational corporations in India, highlighting both opportunities and challenges faced by these companies.

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Indian government policies
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The government is responsible for enacting policies that guide how business is conducted in the
country. The policies may encourage or discourage foreign investment such as investment by
multinational companies.in the past ten years, the Indian government has enacted policies that
have had an impact on many multinational companies operating in the country. The made
policies affect the relationship between the government and the multinational companies and a
lot of care should be taken so as not to negatively affect the economy of the country (Kothari, et
al.2013, p.286). Multinational companies are after making huge profits and if there are no
policies to regulate their operations, the company may exploit the economy of India as they may
use cheap labor or even child labor with poor working conditions to minimize costs and
maximize profit (Edwards, et al.2013, pp.547-587). The MNCs should bring benefits to the host
nation to establish strong connections for the continued support from the government such as
paying taxes and other obligations that help the government to raise revenue for supporting the
budget.
There various policies that have been put in place to manage the operations of MNCs in India
and they include regulatory reforms where the government of India has embarked on trying to
minimize the time taken for one to incorporate a company. This reform was initiated in 2014 to
ensure that starting a business was easier and this attracted MNCs in the country as the activities
of the company would commence in the shortest time possible. This move has seen the country
become the host of many international companies and this creates job opportunities for many
Indians. This strategy leads to improved standards of living as the employed Indians are able to
gain income.
The high taxation policies which have been enacted in the country have also scared away many
international companies and the existing ones are looking for an exit strategy to avoid the high
tax burden imposed by the Indian government. This policy will enable the economic
development of the local companies as they are given a chance to thrive and be able to compete
with giant companies (Singh, 2017, p.477). The 40% tax imposed on some goods such as coca-
cola is quite high and the company was forced to shut down some of its plants due to the high tax
proposed by the government and this affects the economic impact of the company as the
spending power has been affected by the high taxes.

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The Indian government also has enacted policies to ban the importation of some goods into the
country such as diesel cars and this will negatively affect the MNCs which manufacture such
cars as they will have a limited market for their products. This move was enhanced to improve
the environmental conservation policies which as been put in place as diesel cars are one of the
major environmental pollutants in the world (Esser, and Jernigan, 2015, pp.2220-2227). This
policy will negatively affect the relationship between the Indian government and foreign
businesses. The MNCs will suffer losses due to reduced market access as the manufactured
vehicle models may run out of demand as the company looks for a new market elsewhere. The
MNCs will not be able to employ many Indians due to lost revenue and this will lead to
downsizing and many people will lose their jobs.
The Indian government also introduced the equalization levy where any Indian making a
payment to a multinational company operating in India, a 6 % deduction will be made for some
specified business to business (B2B) transactions such as advertising (Singh, 2013, p.805). This
will force the multinational companies operating in India to receive revenues which are less by
6%. This will adversely affect the revenues of the MNCs as they are already affected by the high
taxation which was imposed by the government and this will affect the socio responsibilities of
the company in the country such as education and health sponsorships which are financed by the
affected company. The policies will affect the socio economic contribution of the company
towards the society welfare negatively.
In 2016, the government of India introduced new bills of currency a policy that was aimed to
combat rapid corruption and money laundering which had affected the company. Shell
companies that operated in the country were charged and this put confidence into international
investors and the move has seen multinational companies expand their operations as they are
now confident with the economy of the country. The move restored faith in multinational
companies that wanted to quit the Indian market due to high cases of corruption and MNCs are
now thriving and this has led to improved relations between the government and the overseas
companies operating in the country. The policies have led to improved business environment and
MNCs can thrive economically. This in turn motivates the MNCs to contribute resources which
will improve the socio economic needs of the society as the company will have enough resources

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to finance education programs in the society such as educating talented needy students in the
society.
Some of the policies which have been incorporated have positively affected the MNCs socio
economic impact while others have been affected negatively (Narlikar, 2013, p.605). This led to
mixed reactions because while some companies where happy as Indian government made
policies, others were hard-pressed to the extent of shutting down operations in some areas of the
country.

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References
Edwards, T., Marginson, P. and Ferner, A., 2013. Multinational Companies in Cross-National
Context: Integration, Differentiation, and the Interactions between MNCS and Nation States:
Introduction to a Special Issue of the ILRReview. ILR Review, 66(3), pp.547-587.
Esser, M.B. and Jernigan, D.H., 2015. Multinational alcohol market development and public
health: Diageo in India. American journal of public health, 105(11), pp.2220-2227.
Kothari, T., Kotabe, M. and Murphy, P., 2013. Rules of the game for emerging market
multinational companies from China and India. Journal of International Management, 19(3),
pp.276-299.
Narlikar, A., 2013. India rising: responsible to whom?. International Affairs, 89(3), pp.595-614.
Singh, M.A., 2013. Revisiting the Naga conflict: what can India do to resolve this conflict?.
Small Wars & Insurgencies, 24(5), pp.795-812.
Singh, M.K., 2017. Taxation of Digital Economy: An Indian Perspective. Intertax, 45(6),
pp.467-481.