• UGI USER
  • Nov 03, 2023
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Q. Examine the impact of liberalization on companies owned by Indians. Are they competing with the Foreign MNCs satisfactorily?

Structure of Answer

Introduction

  • Briefly explain Liberalization, when it was initiated, its aim and objective

Body

  • Explain Impact of 1991 Liberalization on Indian Companies both positive and negative impact with examples.
  • Explain how Indian Companies Competed with Foreign MNCs Post-1991 Liberalization

Conclusion

  • Mention Liberalization has transformed Indian companies however, they must continue to focus on innovation, quality, and global expansion to sustain their competitiveness in the dynamic global market

Liberalization in India refers to the economic reforms initiated in 1991, which opened up the Indian economy to global trade and investment. These reforms aimed to reduce government intervention and promote economic growth.

Impact of 1991 Liberalization on Indian Companies

Positive Impact of 1991 Liberalization on Indian Companies

  • Growth of IT Industry: Liberalization fostered the rise of the Indian IT industry. Companies like Infosys and Wipro emerged, becoming global leaders in software services.
  • Entry into Global Markets: Liberalization allowed Indian companies to access international markets. Tata Motors entered the global market with the acquisition of Jaguar Land Rover.
  • FDI Inflows: Foreign direct investment increased, aiding the growth of Indian industries. PepsiCo’s investment in India expanded the food and beverage industry.
  • Employment Opportunities: liberalization created job opportunities. The IT sector alone employed millions.
  • Diversification: Companies diversified their offerings. Aditya Birla Group expanded into sectors like telecom and financial services.

Negative Impact of 1991 Liberalization on Indian Companies

  • Hectic Work Culture: IT companies like Infosys and TCS saw employees facing long work hours, affecting work-life balance.
  • Increased Competition: like Automotive sector witnessed higher competition with entry of global players like Hyundai and Toyota.
  • Struggling MSMEs: Micro, Small, and Medium Enterprises faced challenges competing against larger companies due to limited resources.
  • Retail Sector Challenges: Traditional retailers faced tough competition from new entrants like Walmart
  • Job Displacement: Labour-intensive sectors faced job losses due to technological advancements.

Indian Companies Competed with Foreign MNCs Post-1991 Liberalization

  • Shift to Capital-Intensive Operations: Post-liberalization, Indian manufacturing, like Tata Steel, shifted to capital-intensive operations by modernizing production facilities.
  • Embracing Technology: Companies like TCS and Wipro harnessed technology, delivering world-class IT services, putting them on par with global tech giants.
  • Quality and Innovation: Businesses like Mahindra & Mahindra improved product quality and design, competing effectively in international markets.
  • Market Diversification: Aditya Birla Group diversified its interests from textiles to metals, cement, and more, expanding its global presence.
  • Strategic Alliances: Joint ventures and collaborations, like the one between Sun Pharmaceuticals and Ranbaxy, challenging foreign MNCs.

Liberalization has transformed Indian companies, enabling them to compete successfully with MNCs. However, they must continue to focus on innovation, quality, and global expansion to sustain their competitiveness in the dynamic global market. The path forward involves further reforms, infrastructure development, and fostering a culture of innovation.