India and Global Value Chains
Watch it on NIICE Nepal YouTube Channel
Event Report
The webinar was about India and Global Value Chains by Dr. Saon Ray, an economist specializing in industry and international trade. Furthermore, her research interests include global value chains, technological upgrading of Indian industries, free trade agreements, et cetera. She begins the presentation by introducing the Global Value Chain. The GVC is a chain of separate but interlinked and coordinated activities which can be undertaken within a single firm or be divided among multiple firms in different geographical locations to bring out a product or a service from conception to complete production and delivery to final customers.
Dr. Ray emphasizes the importance of the shift during the 2000 period when a large part of Global Trade is concentrated on intermediate goods. Due to these Value Chains, which imply that several different parts of the activity would be located in different countries, there will all come together under what is known as a lead firm which is a network of a contract of manufacturers, suppliers, logistics, et cetera.
GVC integration is affected positively by these several factors suggested; regional trade agreement; investment barriers to multinational corporations; infrastructure development; speed and flexibility of movement of physical goods and information; effectiveness of legal and regulatory systems; efficiency of services; development of a skilled workforce; friendliness of the business climate; and capacity of domestic firms to contribute to the supply chain.
The Global Value Chain can apprehend the value of taking any product completed in many countries. The reason is the interconnectedness of countries and the result of technological advancements, trade liberalization, and demand side factors – other reasons include reduced trade costs, including land transport and port costs, freight and insurance costs, et cetera. All of these have come together to give rise to what we know as GVC Trade.
GVC Trade work with only twofold things backward and forward integration. Backward integration measures the value of imported inputs in the overall exports of a country. Intermediate inputs are used in third countries for further export measures and forward integration.
She further give details how a country’s participation in GVC determines. Size of the economy; larger domestic market, lower participation. The stock of natural resources; more extensive stock, higher participation. Distance to world markets; lower distance, higher participation. Composition of exports; more final goods, lower participation.
Global Value Chains and the new trends are due to the Ukraine War disruptions. The disruptions that have started since 2020 have not reached away, and the disruption persists in some products or others. It will also indicate that global coalitions could vary because of the war. The WTO shows the percentage of Russian and Ukrainian imports. Particular concerns from other countries like India and Nepal also have been exposed to Ukraine or Russia. For example, in India, 70% of maize is imported from Ukraine, and much exposure as far as oil and other commodities are concerned.
Dr. Ray concludes the webinar by remarking that the redrawing of value chains and the influence of the Ukraine war has to be seen not solely in Ukraine’s exports but also in Russia’s exports. It signifies that some of it would be redrawn because of the sanctions, or different trade routes would be opened because of the war. China’s trade war with the US had a ripple effect; similarly, the Ukraine-Russia War will have the exact effect worldwide. Furthermore, different things that have been points of contention for India are staying out of the regional agreement asset and recognizing the rule of FDI and the inflows it is in Global Value Chains and manufacturing. Moreover, the linkages with services are paramount but often not accentuated or understood enough.
Prepared by: Apple Mae Domondon, Intern at NIICE.