Global Value Chains (GVCs) -

NITI Aayog CEO highlighted the need for India to get into global value chains (GVCs) to boost exports and secure supply chains.

What are Global Value Chains (GVCs)?

It refers to a production sequence for a final consumer good, with each stage adding value (e.g., production, processing, marketing, transportation, distribution) and with at least two stages taking place in different countries.
- For example, a smartphone assembled in China might include graphic design elements from the United States, computer code from France, and silicone chips from Singapore.
As per OECD, an estimated 70 % of trade occurs through GVC.
Countries can participate in GVCs by engaging in either backward or forward linkages based on their economic specialisation.
- Backward linkages: when one country uses inputs from another country for domestic production.
  - For example, India imports cotton fabric from Italy to make and export shirts.
- Forward linkages: when one country supplies inputs/intermediate goods that are used for production in another country.
  - For Example, India supplies auto components to a German automaker for use in car production.

measures taken to integrate India into Global Value Chains (GVC):

- - Aims at process re-engineering and automation
  - Goal is to facilitate ease of doing business for exporters

Production Linked Incentive (PLI) scheme for large scale Electronics manufacturing:

- - Launched in 2020
  - Has encouraged GVC participation
  - Example: 3 of Apple Inc’s contract manufacturers have set up manufacturing bases in India

- - Focuses on districts as units for converting into manufacturing and export hubs
  - Involves identifying products with export potential in each district

- Launched in 2014
- Goal is to make India a hub for manufacturing, design and innovation
- Key outcome: FDI equity inflow in the manufacturing sector increased by 57% between 2014 and 2022

Global Value Chains (GVCs)