Production fragmentation in trade of manufactured goods in India: Prospects and challenges

The present paper analyses the phenomenon of production fragmentation in trade of manufactured goods in India, using trade data at the Standard International Trade Classification (SITC) 5-digit product level. It estimates production fragmentation through a decomposition of intra-industry trade in parts and components into horizontal and vertical intra-industry trade over the period 1994-2012. The paper at the product level finds that aircraft parts and automobile parts and the components industry are emerging areas of production fragmentation in manufactured goods trade over this sample period. It further observes that aircraft parts (SITC 79295) is the only parts and component product to undergo product fragmentation at the higher end of the global value chain and that the auto parts and components industry is found to be experiencing this primarily at the lower end of the value chain.