India will see 20% more MNCs than China by 2024

Written by Chanpreet Khurana | Chanpreet Khurana | New Delhi | Updated: May 1 2010, 04:38am hrs
India is poised to top a bloc of 15 emerging markets in at least one category. According to a PricewaterhouseCoopers (PwC) report released on Thursday, the country would launch the maximum number of multinational companies (MNCs) over the next decade, among a group of emerging economies that include Russia, Brazil and South Korea. The country will overtake even China, the current leader with 141 new MNCs added in 2009, by 2018.

The report cites Indias increase in both investment intensity and openness relative to China as the key reason for New Delhi taking the lead over Beijing. The Emerging Multinationals report projects that at least 2,200 Indian companies will develop an international presence over the next fifteen years. The report adds that while India and China will collectively account for 42% of the total new MNCs arising in that period, India will see 20% more new MNCs than China by 2024.

PwC India leader for markets and industries Jairaj Purandare said, It is encouraging to know that India will replace China as the largest source of new multinationals in the emerging world from 2018 onwards. The key drivers for this are the relative increase in both investment intensity and openness that the Indian economy offers.

Even as these economies flex growing muscle in a post recession world, new trends are emerging in the companies expansionary plans. Yael Selfin, the PwC head of macro consulting, said, More new multinationals are moving straight into developed economies as opposed to setting up their first foreign operation in a neighbouring emerging economy. These new multinationals are increasingly likely to be in business services or higher value-add manufacturing sectors as opposed to the more basic natural resource extraction sectors.

The development could have implications for a host of companies offering business-to-business services such as telecommunications and information technology-enabled services. Setting up of new offices and manufacturing facilities will result in growing demand for local services and infrastructure by the new MNCs, according to the report.

The report also points to a shift in 2009 among new MNCs focus from natural resource extraction to offering business services (9.2%), electronic components (9.2%), manufacturing industry machinery, equipment and tools (11.3%). The share of new coal, oil and natural gas focused companies fell from 7.4% in 2005 to 1.4% last year. South Korea, Malaysia, Russia and Singapore may in combination represent up to a 36% share in the new MNCs that will likely be added in the projection period to 2025.

According to the report, while the South American countries (Argentina, Brazil, Chile and Mexico) are expected to be a relatively smaller source of new MNCs, the export-orientated South-East Asian countries (Malaysia and Singapore), along with oil-rich Russia and the newly industrialised South Korea, are expected to continue to produce large amounts of new multinationals.

An econometric approach that included measures such as home market size as determined by real gross domestic product (GDP), investment intensity measured as the investment to GDP ratio and trade openness assessed in terms of the exports to GDP ratio, were used to arrive at the findings. The study included 15 emerging nations across geographies. These are Argentina, Brazil, Chile and Mexico in the Americas; Hungary, Ukraine, Romania, Poland and Russia in Europe; India, China, Malaysia, Vietnam, South Korea and Singapore in Asia.