ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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MNCs and Domestic Finance


Permit me to raise again (further to my letter in EPW of July 15) the issue of foreign firms raising finance in India to fund the takeover of Indian firms.

Lot of discussion is taking place in the country on the issue of allowing a level playing field for the foreign investors. But are policy-makers clear what exactly the term ‘level playing field’ means when they use it? Normally, one would have thought that it means that foreign investors setting up shop in India would not be subjected to any restrictions that do not apply to domestic investors in an industry or trade. We welcome foreign firms to India because they bring to the country capital, technology and managerial skill. But obviously spokespersons of the central government do not think that a foreign company needs to bring with it foreign capital. Otherwise how can a company like the cement foreign MNC Lafarge be allowed to acquire cement plant after cement plant without bringing in foreign capital for the purpose of takeover? This in fact amounts to discrimination against domestic competitors of Lafarge. Our financial institutions and banks are too ready to finance foreign firms. As several studies have shown, a foreign MNC is considered a better borrower.

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