To be or not to be in global value chains : sectoral analysis of GVCs in India

Guide(s)

Chanda, Rupa

Department

Economics

Area

Economics

University

Indian Institute of Management Bangalore

Place

Bangalore

Publication Date

3-31-2019

Year Awarded

March 2019

Year Completed

March 2019

Year Registered

June 2013

Abstract

Global Value Chains involve complex networks of international trade, cross-border investments and global production. Rapid globalization and liberalization have encouragedcompanies to reorganize and relocate their operations so as to gain from the comparative advantage offered by different geographies. At a time when imports increasingly act as a key complement to local production and exports,such cross-border value chains, intra-firm or inter firm, regional or global, account for around 80% of global trade. Value chains assume importance as participation in GVCs has been associated with higher growth in GDP per capita. For developing countries, the trade, investment, and knowledge flows that underpin GVCs provide a means for rapid learning, innovation and industrial upgrading (Lall, 2000; Humphrey and Schmitz, 2002). GVCs are also viewed as potentialdynamic instruments to enhance productive capacity, by facilitating the adoption of technology and skill development of the workforce, thus helping lay the foundation for long-term industrialization (Sturgeon, 2001; Oikawa, 2008; Shin et.al, 2009; Johnson and Noguera 2012; Kowalski et al. 2015). Several star performers like China, Korea and a few South East Asian nations have already evidenced this by accelerating their growth process and playing non-linear catch-up with the developed world, largely due to active participation in GVCs. Against this backdrop, value addition through manufacturing (MVA) has been a key area of focus of both firms and policy makers as a strategic driver of overall growth and development in developing nations. India’s share in global MVA has increased, but not as spectacularly as that of contemporary nations like China. Using forward and backward integration as measuresof GVC participation1, India has consistently shown high forward participation, especially in services sectors (particularly business services) and certain manufacturing products (like Textiles and Chemicals). However, India’s backward integration in value terms, especially in manufacturing sectors, is much higher indicating a high dependence on imports for domestic value addition. In line with the country’s goal to intensify its share of manufacturing output in both domestic as well as global production, this thesis aims to address certain fundamental questions regarding India’s involvement in GVCs, in particular, why India’s degree of participation in sectoral GVCs is so low and how its GVC participation rates can be enhanced.With the unit of analysis being the firm, this thesis attempts to assess the performance of firms in India in GVCs and to better understand the major facilitators of and deterrents to GVC participation from the firms’ perspective. This addresses a critical gap in the GVC literature as earlier studies have focused on the country or the industry as the unit of analysis. In this thesis, the unit of analysis is the firm which decides whether and to what extent to engage in trade and to participate in GVCs. In addition, the thesis focuses on two key manufacturing industries in the Indian economy – Automotives and Electronics –and outlines the sector-specific challenges and opportunities facing firms in these sectoral GVCs. It thus also addresses the paucity of sector-specific studies in India in the context of GVCs. Global Value Chains involve complex networks of international trade, cross-border investments and global production. Rapid globalization and liberalization have encouragedcompanies to reorganize and relocate their operations so as to gain from the comparative advantage offered by different geographies. At a time when imports increasingly act as a key complement to local production and exports,such cross-border value chains, intra-firm or inter firm, regional or global, account for around 80% of global trade. Value chains assume importance as participation in GVCs has been associated with higher growth in GDP per capita. For developing countries, the trade, investment, and knowledge flows that underpin GVCs provide a means for rapid learning, innovation and industrial upgrading (Lall, 2000; Humphrey and Schmitz, 2002). GVCs are also viewed as potentialdynamic instruments to enhance productive capacity, by facilitating the adoption of technology and skill development of the workforce, thus helping lay the foundation for long-term industrialization (Sturgeon, 2001; Oikawa, 2008; Shin et.al, 2009; Johnson and Noguera 2012; Kowalski et al. 2015). Several star performers like China, Korea and a few South East Asian nations have already evidenced this by accelerating their growth process and playing non-linear catch-up with the developed world, largely due to active participation in GVCs. Against this backdrop, value addition through manufacturing (MVA) has been a key area of focus of both firms and policy makers as a strategic driver of overall growth and development in developing nations. India’s share in global MVA has increased, but not as spectacularly as that of contemporary nations like China. Using forward and backward integration as measuresof GVC participation1, India has consistently shown high forward participation, especially in services sectors (particularly business services) and certain manufacturing products (like Textiles and Chemicals). However, India’s backward integration in value terms, especially in manufacturing sectors, is much higher indicating a high dependence on imports for domestic value addition. In line with the country’s goal to intensify its share of manufacturing output in both domestic as well as global production, this thesis aims to address certain fundamental questions regarding India’s involvement in GVCs, in particular, why India’s degree of participation in sectoral GVCs is so low and how its GVC participation rates can be enhanced.With the unit of analysis being the firm, this thesis attempts to assess the performance of firms in India in GVCs and to better understand the major facilitators of and deterrents to GVC participation from the firms’ perspective. This addresses a critical gap in the GVC literature as earlier studies have focused on the country or the industry as the unit of analysis. In this thesis, the unit of analysis is the firm which decides whether and to what extent to engage in trade and to participate in GVCs. In addition, the thesis focuses on two key manufacturing industries in the Indian economy – Automotives and Electronics –and outlines the sector-specific challenges and opportunities facing firms in these sectoral GVCs. It thus also addresses the paucity of sector-specific studies in India in the context of GVCs.

Pagination

289p.

Copyright

Indian Institute of Management Bangalore

Document Type

Dissertation

DAC Chairperson

Chanda, Rupa

DAC Members

Gupta, Subhashish; Prabhu, Ganesh N

Type of Degree

Ph.D.

Relation

DIS-IIMB-FPM-P19-08

This document is currently not available here.

Request Access

Share

COinS