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  • Published: 24 October 2015*
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There are two types of market economy,one is free market economy refers to a capitalist economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy,and another is social market economy is a nominally free-market system where government intervention in price formation is kept to minimum but the state provides significant services in the area of social security ,health,education,unemployment benefits and recognition of labor rights through national collective bargaining arrangements.

There are two controversial schools about the regulation of government in market.One school claims that there should not be the regulation of government in the market.If there is any regulatory face of the state,the market cannot move freely to set the prices of goods and services.The other school says that there should be some actions of the government to regulate the market but the actions that will be taken obviously should be minimum.Kautilya was a famous economist in the regime of Samrat Ashok,according to him,Private property accumulation is the right of the people and the king (government) must protect that right according to law.(Free market but the government as regulator).

The economy of India is the seventh largest in the world by nominal GDP and the third largest by purchasing power parity.The country is one of the G-20 major economies,a member of BRICS and a developing economy among the top 20 global traders according to the WTO.The post independence-era Indian economy (from 1947 to 1991) was a mixed economy,but after a fiscal crisis in 1991,India has rapidly adopted free-market principles and liberalized its economy to global trade.Since 1991,continuing economic liberalization has moved the country towards a market based economy.Indian economic policy after independence was influenced by the colonial experience which was seen by Indian leaders as exploitative and by those leaders,exposure to British social democracy as well as the planned economy of the Soviet Union.Jawaharlal Neheru ,the first prime minister of India ,formulated and oversaw economic policy during the initial years of the country’s independence.They expected favorable outcomes from their strategy,involving the rapid development of heavy industry by both public and private sectors,and based on direct and indirect state intervention,rather than the more extreme Soviet-style central command system.In 1991 then government initiated the economic liberalization.The reforms reduced tariffs and interest rates and ended many public monopolies,allowing automatic acceptance of foreign direct investment in many sectors.By the turn of the 21st century,India had progressed towards a free market economy,with a reduction in state control of the economy and increased financial freedom.India is often seen by one of the most rising economic superpower is believed to play a great role in the global economy.

The present government of India has undertaken some necessary structural adjustments with a focus on reforming the inefficient government sectors.During Modi period the first budget presented in July 2014,was short to restructure wasteful subsidy programs and to high economic growth.Prime minister Modi has promised to start an economic reform in order to attract foreign direct investment to develop public and private sectors.Government policies always emphasis on favor domestic firms.These policies are attracting the Multinational companies to invest in this country.Multinational Companies are the organizations that manage production or offer services in more than one country.Now a days India is occupied by these companies.After the financial liberalization in India in 1991,the number of multinational companies in India has increased rapidly.Most of the companies in India from from the U.S,one can also find many companies from other countries as well.The multinational companies in India represent different purpose of companies from different countries.In the early period U.S companies–the majority of the multinational company India,account for about 37% of the turnover of the top 20 firms operating in India.Now the condition has changed.More organizations from European Union like Britain,Netherlands,Germany,Italy,France Finland and Belgium have outsourced their works to this country.Finished mobile giant Nokia has their second largest base in this country.There are also multinational companies like Vodafone and British Petroleum that represent Britain.India has a huge market for automobiles have stepped in to this country to reap the market.It is easy to find many showrooms of multinational company automobile companies like Piaggio,Ford motors,Fian in India.Pharma major Sanofi,Aventis and French Heavy Engineering have also started their operations in India.The later one is in fact one of the earliest entrants in the list of multinational companies in India,which is currently growing at a very rapid rate.There are also a number of infrastructure builders and oil companies from Middle-east countries.Hyundai Motors has done well in mid-segment car market in India.Electronic giants like LG Electronics and Samsung from South Korea have already made a significant impact on the Indian Electronics market.

Since there is a free market economic system in India,there are a number of reasons why the MNCs are coming down to India.The policies of the government towards Foreign Direct Investment has also played significant role in attracting the multinational companies In India.For quite a long time,India has a restrictive policy in terms of Freign Direct Investment.As a result there was lesser number of companies that showed interest in investing in Indian market.However the scenario changed after 1991,during the financial liberalization of the country.Governments now a days makes continuous efforts to attracting FDI by relaxing many of its policies.As a result MNCs have shown interest Indian market.

Multinational companies consider India as a preferred destination for business for some reasons:
*Huge market potential of the country
*Foreign Direct Investment attractiveness
*Labor competitiveness
*Macro-economic stability

Though there is no actual free market economy in any country of the world,the state has some regulations over its market economy.If these multinational companies want to invest in Indian different economic sectors,they have to give royalty or tax to the government,and they are supposed to use the local manpower to produce their products.Thus the people of this country introduce foreign technology and research and thus they are developing day by day…

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