An Analysis of Global Value Chain Incomes in Indian Industries

The importance of using measures of global value chains to understand the participation of countries in global trade has increased in recent years, as the fragmentation of production accelerated globally. This paper provides estimates of foreign content in domestic production in Indian industries, Indian content in the production of global industries, and the reliance of income generated in Indian industries on foreign demand. In general, India’s participation in GVC is relatively lower than in many other countries, yet it is improving. We find that the expansion of India’s manufacturing, and to some extent, market services sectors increase demand for output from upstream sectors in foreign countries that produce intermediate inputs used in the downstream sectors in India. We also see that Indian content is relatively the highest in global textile production, but its contribution to India’s GDP by means of value chain income is not the highest and has declined over the years. We also provide some initial evidence that the relationship between India’s participation in the GVC and sectoral productivity level is positive, which suggests the importance of intensifying India’s participation in the GVC.