The importance of using measures of global value chains to understand the participation of countries in global trade has increased in recent years, as the fragmentation of production accelerated globally. This paper provides estimates of foreign content in domestic production in Indian industries, Indian content in the production of global industries, and the reliance of income generated in Indian industries on foreign demand. In general, India’s participation in GVC is relatively lower than in many other countries, yet it is improving. We find that the expansion of India’s manufacturing, and to some extent, market services sectors increase demand for output from upstream sectors in foreign countries that produce intermediate inputs used in the downstream sectors in India. We also see that Indian content is relatively the highest in global textile production, but its contribution to India’s GDP by means of value chain income is not the highest and has declined over the years. We also provide some initial evidence that the relationship between India’s participation in the GVC and sectoral productivity level is positive, which suggests the importance of intensifying India’s participation in the GVC.
Bitte loggen Sie sich ein, um Zugang zu diesem Inhalt zu erhalten
This stream of literature, often called as the ‘new trade theory’, emphasizes that trade between countries could occur even when they have identical economic endowments if increasing returns to scale exists (See Krugman 1980).
Also there are several studies that examine the impact of offshoring and participation in GVC on productivity and jobs, especially on the home markets from where the production of specific activities are shifted to the offshoring economy (see Milberg and Winkler 2013; Taglioni and Winkler 2014; Schwörer 2013). Often it is argued that the offshoring causes loss of jobs in the home countries. The opposing view is that if the positive productivity effects are large enough, it can enhance job creation and/or wages in the home markets, especially in the long-term (Grossman and Rossi-Hansberg 2008). We do not delve into this literature. See Farole et al. (2018) for an in-depth discussion on the labor market implications of the global value chain.