The discussion on Global Value Chain (GVC) and the participation of the Indian economy was organized under the series of ‘The State of Foreign Trade- #Talking Trade and by the IMPRI Center for Finance and Economics. The #WebPolicyTalk was mainly centered around the works of Prof Takahiro Sato, who through his presentation attempted to highlight the role of the Indian manufacturing industries and place it in contrast with economies like China and the ASEAN countries.
The Chair of the session, Prof Mukul Asher, Former Professor, Lee Kuan Yew School of Public Policy, National University of Singapore, opened the floor, speaking of how the economy is changing from being liberal into a more fragmented form of economy and understanding the role of GVC during these changing times is absolutely necessary. Moderated by Dr. Nalin Bharati, the discussions led to reflections and questions regarding more engagement with the GVC and addressed the gaps within academic and policy spheres.
The Role of GVC
Prof Takahiro Sato, Professor, Research Institute for Economics and Business Administration (RIEB), Kobe University, Japan, began his presentation by highlighting how important the role of GVC is in the economic development of developing countries. The firms that have enhanced themselves to be a part of the GVC should take advantage of equipping themselves with the latest technologies and management practices to increase productivity. He cited the examples of Toyota, Nike, and TCS to discuss the relevance of GVC as a concept, in general, before highlighting the role of India in this specific context.
Elaborating on the flow of events in the global value chains, he took the example of the assembly of the Boeing 787 and showed that various levels are outsourced to different countries. Talking of his study, he highlighted how his findings were reached using data of both import and export activities of the country, specifically focusing on pure backward participation and two-sided participation.
India’s Participation in the GVC
He described how, in general, India’s GVC is low in comparison to the global standards but has relatively higher GVC in the area of mining, petroleum, chemical, and non-metal industries. He pointed out that from 1990 to the global recession of 2008, the degree of India’s participation in the GVC’s had been increasing. Since the global recession, GVC participation has stagnated, except that of metallic industries. He also emphasized how the existing studies in India specifically regarding this topic have maintained a bias for IT and pharmaceutical studies and there is a gap in the literature regarding the domestic value chain. Sectors such as oil refining still don’t have adequate literature to address it.
Administration and Judicial Bottlenecks
Prof Dev Nathan, Economist; Research Director, GenDev Center for Research and Innovation, Gurgaon, explained how the need for specialization was important. Increasing the competency and sub-contracting and outsourcing is what will add value to the GVC, which should be undertaken by India. He also stated that some of the international GVCs have a better approach than the domestic value chain, pointing out the garment industry research, which was conducted by him on how the traders often find it difficult to navigate around getting reimbursements of GST from the government.
He also said that the knowledge base of the different stages of the value chain is often controlled and kept away, especially through the utilization of intellectual property laws, thus making branding and marketing a more difficult stage to achieve than the manufacturing stage. The buyer’s and seller’s comparative profit was also discussed by him in detail.
Domestic Market and Institutions
Prof Amita Batra, Professor, Centre for South Asian Studies, School of International Studies, Jawaharlal Nehru University (JNU), New Delhi, highlighted the role of the domestic value chain and how comparing the domestic and the international spheres value chains are distinctively different. She spoke about the capacity of doing smaller tasks and the performance of those specific skills is leading to enhancement within the domestic market. She questioned the idea of how the performance by different countries entails the notion that different economies and institutions in place in terms of policy function differently, highlighting how the ASEAN countries have remained pro-active but not China, calling for a nuanced analysis of the countries.
She pointed out that the garment industry has adequate literature as it was the integrating factor for India to merge itself within the global economy. She concluded her discourse by questioning if India has increased involvement in the manufacturing sector and if the wage increase marks with itself some degree of increment in levels of competency and skills which should be introspected upon. She spoke about how important inter-trade agreements are and interregional cooperation is absolutely necessary for the benefit of the growth of the Indian economy.
The concluding remarks were highlighted by Dr. Nalin Bharati, Associate Professor, Humanities and Social Sciences, Indian Institute of Technology (IIT), Patna thanking Prof Sato for his discourse. He highlighted how important it is that India’s potential is fostered with an adequate measure for the country to thrive. In terms of production, where the low cost of production can be cut by being not simply on the receiving end of providing services but the outsourcing country should also become an important knowledge hub by owning more intellectual property and upskilling of its people which will enhance the economy along with the betterment of the manufacturing sector.
Acknowledgment: Srimoyee Biswas is a Research Intern at IMPRI