WIR-2005
Indian companies emerge as TNCs
By Daya Krishna
ACCORDING to the World Investment Report 2005, published by the United Nations Conference on Trade and Development (UNCTAD), the global flow of Foreign Direct Investment (FDI) which had risen to the peak level of $ 1,393 billion in 2000 and had fallen by more than 50 per cent to $ 633 billion by 2003, had risen marginally to $ 648 billion in 2004, which was less than half of the FDI in 2000. (Table)
This fall of more than 50 per cent in World FDI was due to the developed countries showing a fall of 66 per cent from $ 1,121 billion in 2000 to $ 380 billion in 2004.
The FDI of the US had fallen steeply from $ 314 billion in 2000 to $ 57 billion in 2003 and had risen to $ 96 billion in 2004, which was only 30 per cent of the FDI in 2000. This 70 per cent fall in the FDI of the US should be considered in view of the fact that the US is the leading propounder of the Washington Consensus which stresses the importance of free movement of capital in the world.
The FDI in Developing countries had risen from $ 166 billion in 2003 to $ 233 billion in 2004 and their share in world FDI had risen from 26 per cent to 36 per cent, which was double of the share in 2000. The share of developed countries in world FDI had fallen from 80 per cent in 2000 to 70 per cent in 2003 and to 59 per cent in 2004.
The steep fall in the FDI in developed countries is due to the continuation of recessionary conditions which is attributed to the following three factors.
1. A downward trend in population of developed countries and a consequent weakening of demand for consumer goods and services.
2. Unemployment and underemployment caused by (a) downsizing of firms; (b) mergers and acquisitions of firm; and (c) shifting of firms to low wage countries.
3. Substantial reduction of imports by a large number of poor countries because of aggravated conditions of poverty and crippling burden of debt due to excessive and continued exploitation by the TNCs who control more than two-thirds of world trade.
All these factors are the result of the TNCs pursuing their objective of optimising profits for raising the stock of capital in accordance with the core idea of capitalism which has degenerated into a form of ?corporate greed?.
India emerging as a TNC
In 2004, the report says, India'soutflow of FDI at $ 2,222 million was more than double of the outflow in 2003 and was also larger than the outflow of FDI from China in 2004. Significantly, India'soutward flow of FDI was about 40 per cent of its inward flow whereas China'soutward flow was a meagre three per cent of its inward flow of a massive 60,360 million dollars.
Several Indian companies including Tatas and ONGC have acquired companies abroad or created overseas subsidiaries in their bid to become transnational companies.
