ABSTRACT
This book is motivated by three questions. First, what is the evidence on India’s lagging in GVC trade? Second, what explains India’s lagging position in GVC trade? And third, how can India overcome barriers to GVC engagement?
To answer the first question,, we present evidence from the literature and data using the Broad Economic Classification (BEC). This evidence is used for identification of the extent of the level of integration of a sector. Some sectors in which India has successfully integrated in GVCs are presented. The lagging sectors, such as specialty chemicals and garments, where India has limited integration or has failed to integrate into GVCs, are discussed next.
The second question is answered through an examination of the role of lead firms, governance structures in value chains and diffusion of technology in each chain examined. we observe that in the specialty chemicals industry, the knowledge and production processes are proprietary and upgrading requires investment in research and development (R&D), while in garments, production processes are more standardized and upgrading can come from use of newer raw materials.
The question of the impediments to India’s engagement in GVCs leads on to the policy implications of how to overcome these barriers? Based on the cases presented, the barriers in each sector are discussed. There are regulatory barriers, administrative barriers and issues related to standards. Many barriers or incentives to trade are common to trade in general, but some can be specific to GVC trade. For instance, participation in GVCs requires further opening to imports and an integrated framework of analysis encompassing goods, services and foreign direct investment (FDI); or imposing of private standards by a lead firm. Logistics and infrastructural barriers are common to all sectors, though they may be more critical in certain sectors.
