Multinationals operating in India have been able to increase their share of profits since liberalisation, at the expense of the Indian private sector.

The 95 multinationals figuring among India's top 900 companies have been able to increase their share of net profits from 7.70 per cent of total profits in 1994-1995 to 10.82 per cent in 2002-2003.

However, despite the increase in their share of net profits, the multinationals' share of total sales among the top 900 companies fell from 8.68 per cent in 1994-1995 to 6.80 per cent in 2002-2003.

This loss of market share has been amply made up by higher gross margins. For instance, gross margins (gross profit + interest) for the multinationals improved from 16.51 per cent in 1994-1995 to 19.45 per cent in 2002-2003, thanks mainly to lower interest rates.

Over the same period, however, the gross margin for the Indian private sector was squeezed from 20.62 per cent to 17.24 per cent. What's more, gross margins for public sector companies too fell from 17.12 per cent to 15.21 per cent, indicating that MNCs in India have been able to introduce other efficiencies into their functioning.

The Indian private sector saw its share of profits fall by a huge 20 percentage points over the period, from 60.76 per cent in 1994-1995 to 40.17 per cent in 2002-2003. At the same time, its share of sales too went down from 53.36 per cent to 50.87 per cent.

The biggest gainer in market share in sales as well as profits has been the public sector, especially the oil companies. The public sector's share of sales went up from 37.96 per cent to 42.33 per cent and its share of net profits moved up from 31.54 per cent to 49.01 per cent of the total sample.

But this improvement was entirely due to the performance of the oil companies. The PSU companies other than in the oil sector showed a fall in their share of sales from 14.03 per cent to 9.64 per cent, while their share of net profits dropped from 14.15 per cent to 9.59 per cent.

Besides lower interest cost, another reason for the higher MNC share in profits has been their ability to lower wage costs. MNCs' share in salaries and wages fell from 11.99 per cent in 1994-1995 to 10.70 per cent in 2002-2003.