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Impact Of Multinational Corporations On Well Being In The Developing Countries Add in library

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Describe about the Impact of Multinational Corporations on Well Being in the Developing Countries?



A Multinational Corporation (MNC) is an organization that is involved in business with more than a country. The other names that are used to refer MNC are international corporation, global giant and transnational corporation. Multinational corporation, according to the United Nations, is an organization that acquires or controls production or service facilities other than the country in which it is based. MNCs home country has its headquarters and its host countries operates business across the world. The various activities of the MNC’s are exporting, importing, manufacturing in different countries. It may also impart patents, licenses and managerial services to firms situated in the host countries. A developing country is characterized with a low standard of living, underdeveloped industrial base and with a low Human Development Index compared to other countries. Developing countries are a non industrialized poor country that needs an opportunity to develop and expand its resources by the process of industrialization. With the advent of globalization and Industrial Revolution, more of developing countries are attracting the multinational corporations to generate business in the countries to increase the general standard of living and status of the developing countries. To understand the importance of MNCs in the developing countries we need to answer the questions: What is an MNC and its role and objectives? What is meant by well being and its indicators? (Burchi & De Muro, 2015)



MNCs are aimed to make investments in different countries to:

Obtain tax benefits in host countries.

Utilize and exploit the resources of the host country.

Acquire the advantages of government concessions in host country.

Alleviate the impact of regulations in home country.

Utilization of cheap labour and low transportation expenses in order to reduce cost of production in the host country.

Gain a dominant position in foreign markets.

Enlarge activities vertically. (Giuliani & Macchi, 2013) (Soni, 2015)

Well being and its indicators:

Well being is defined as the process of how people feel and how they function either personally or socially and people evaluate their lives. The concept of how people feel is in the form of emotions like happiness and sorrow or anxiety, by people function in which they get connected to the rest of the world. The concept of how people evaluate themselves lies in the fact that each people has a level of satisfaction which is defined by the standard of living, utilizing the basic necessities of life like food, clothing and shelter, and also how they rate themselves in comparison to the best possible lifestyle. Now the economic well being is a much wider concept which not only includes the emotions, satisfaction or the rating of individuals based on their lifestyle, but also has a much deeper meaning when it comes to measuring the economic well being at an national level. To understand this economic well being at the national level, it is important to understand the basic indicators of the economic well being. We shall define it further.



1. GDP per head (Real Gross Domestic Product per capita)- the growth in GDP is an indicator of economic well being but what is to be kept in mind is the growth in population by considering GDP per head.
2. Real NNDI per capita (Real Net National Disposable Income per capita)- this is the total income available to residents of a country. This reflects the standard of living of the residents thereby indicates the measure of well being.
3. Household Income per head- all the incomes of the economy is not comprised of only household but the incomes are also generated by the firms and government.
4. Unemployment rate- unemployment has always been used as the measure to indicate the state of any economy. Thus the rate of unemployment can be considered as the indicator of well being.
5. Inflation rate- (Consumer Price Index)- inflation impacts the household and net wealth of the nation. Thus to measure the economic well being, it is necessary to take into accout the inflation rate.
6. Human Development Index- this index includes areas like education, health and income. HDI is calculated based on the per capita income, life expectancy rate and gross enrollment ratio to schools. Thus HDI is the perfect indicator to the economic and national well being. (Soni, 2015)

Impact of mncs on the well being in the developing countries:

Developing countries need the scope to develop and expand. In achieving this most of them are attracting Foreign Direct Investment (FDI). The governments of these developing countries are in the constant urge to attract the multinational corporation with the view that such extracting would benefit the economy. MNCs are considered to be the channels of generating, employment and bring about important changes in the technology, help the local firms to increase their productivity and potentiality to export. MNCs play a very important role to diversify and improve the level of economic development within the economy. Let us consider a developing nation, India and the impact of MNC on India’s well being.

India, since 1991, India has experienced an upsurge within the economy in the presence of MNCs and with this there was tremendous increase in the amount of FDI. The adoption of new economic policy by India in 1991 has three characteristics: opening up of the market to global markets, reduction in import tariffs and state intervention in domestic policy making. In the presence of MNCs India had accumulated around $56.6 billion in FDI contracts from 1991 to 1998. He crisis in 2991, led the growth rate at 1.2% but by 1995-1996, the growth rate reached7.1%-7.5% respectively. Also with liberalization, there was an increase in employment as MNCs created a lot of Jobs. This also increased the requirement of NDDI per capita and real GDP per capita. Thereby increasing the level of standard of living and thus incorporated the economic well being. Since people now have more money to spend, they can available better education, health and better standard of living. (, 2015) (EMDE, 1999)


Data Of India: Inflation, Export Percentage, Gdp Growth And Fdi Net Inflows (1999, 2012, 2013)





Inflation consumer prices annual %




Export % of GDP




GDP growth annual percentage




FDI net inflows % of GDP




Data Source: World Development Indicator, World Bank.

The data reveals that after 1991, the some of the economic well being indicators rapidly increased till 2013 in India. (, 2015)



The impact of MNCs on the well being of the developing countries is diverse and is augmenting. With the globalization and industrialization, all the developing countries are able to generate jobs, reduce inflation rate, establish GDP growth and improve the status of these developing countries’ HDI. All these indicators tells us that the economic well being of the developing countries is much more appealing. (OVERSEAS DEVELOPMENT INSTITUTE, 2015)



Burchi, F. and De Muro, P. (2015). Measuring Human Development in a High-Income Country: A Conceptual Framework for Well-Being Indicators. Forum for Social Economics, pp.1-19., (2015). Sectorwise Analysis of FDI Inflow in India. [online] Available at: [Accessed 9 Feb. 2015]., (2015). India | Data. [online] Available at: [Accessed 9 Feb. 2015].

EMDE, M. (1999). AN ANALYSIS OF THE EFFECTS OF MNC ON INDIA SINCE LIBERALIZATION. [online] Available at: [Accessed 9 Feb. 2015].

Giuliani, E. and Macchi, C. (2013). Multinational corporations' economic and human rights impacts on developing countries: a review and research agenda. Cambridge Journal of Economics, 38(2), pp.479-517.

Hansen, M., Pedersen, T. and Petersen, B. (n.d.). MNC Strategies and Linkage Effects in Developing Countries. SSRN Journal.


Soni, S. (2015). Essay on the Meaning and Definition of Multinational Company. [online] Available at: [Accessed 9 Feb. 2015].

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