Strengthening India’s Participation in Global Value Chains (GVCs): Initiatives and Future Prospects

Global Value Chains (GVCs) play a pivotal role in the globalized economy, allowing countries to become part of international production networks that enhance economic growth and competitiveness. For India, deeper integration into GVCs presents significant opportunities to leverage its industrial strengths, boost exports, and create high-quality jobs. With recent initiatives by the government and industry stakeholderslead by CII, India is striving to strengthen its role in GVCs.

The Importance of GVCs for India

India’s participation in GVCs is crucial for accessing international markets, adopting global best practices, and increasing export diversification. Industries such as pharmaceuticals, IT, automotive, and textiles have already integrated into global supply chains, contributing to India’s economic growth. Deeper involvement in GVCs can enable India to benefit from technology transfer, foreign investments, and knowledge exchange, helping its industries move up the value chain.

CII’s Role in Promoting India’s GVC Integration

Recognizing the importance of GVCs, the Confederation of Indian Industry (CII) established the Task Force on GVCs to enhance India’s role in international production networks. Through policy advocacy and collaboration with stakeholders, the Task Force focuses on reducing barriers to GVC participation, promoting domestic value addition, and encouraging foreign investment.

One of the primary areas of CII’s advocacy is the need to reduce tariff barriers and address the issue of inverted duty structures, where raw materials are taxed higher than finished goods. By reducing tariffs on intermediate goods, CII aims to lower production costs for manufacturers, making Indian products more competitive globally. Another focus area is fostering collaboration between domestic and foreign firms. Through knowledge transfer and the establishment of stronger linkages, Indian firms can benefit from foreign investments and technological expertise, enabling them to move up the value chain.

CII has also worked closely with NITI Aayog, organizing the “National Workshop on Global Value Chains: India’s Potential and Prospects.” This event brought together policymakers, industry leaders, and experts to discuss how India can improve its participation in GVCs. The discussions highlighted the importance of higher investments in R&D, faster execution of industrial infrastructure projects, and the creation of a supportive local ecosystem to enhance India’s ease of doing business. These efforts are critical for addressing India’s cost disadvantages and improving its global competitiveness.

Challenges and Future Prospects

Despite these initiatives, India faces several challenges in deepening its GVC integration. Infrastructure bottlenecks, regulatory complexities, and high trade costs remain significant hurdles. Moreover, India competes with countries like Vietnam, Bangladesh, and Mexico, which offer lower labor costs and more favorable trade agreements. To overcome these challenges, India needs to focus on speeding up the execution of industrial infrastructure projects, reducing regulatory complexities, and improving trade logistics.

CII has also emphasized the need for a well-designed industrial policy that prioritizes domestic value addition over mere assembly. Such a policy would encourage Indian firms to produce more components locally, reducing dependency on imports and improving their competitiveness in global markets. Higher investments in R&D are also essential to foster innovation and develop new technologies that can contribute to value creation.

The future prospects for India’s GVC participation are promising, particularly as global companies seek to diversify their supply chains in response to geopolitical tensions and the COVID-19 pandemic. India’s large domestic market, growing digital infrastructure, and government initiatives provide a strong foundation for expanding its role in GVCs. Continued collaboration between policymakers, industry leaders, and organizations like CII will be crucial for driving reforms, fostering innovation, and improving India’s competitiveness in global supply chains.

Conclusion

India’s deeper integration into Global Value Chains is critical for its long-term economic growth. Government initiatives such as the PLI scheme and Make in India 2.0, along with CII’s policy advocacy, have positioned India to capitalize on its industrial strengths and expand its GVC participation. By addressing existing challenges, promoting collaboration between domestic and foreign firms, and fostering innovation, India has the potential to transform from an assembler of goods to a producer of high-value products. This would not only enhance India’s global competitiveness but also create more jobs and spur sustainable economic growth.