Highlighting the need for India to participate in Global Value Chains (GVCs), mention the associated concerns. Also suggest remedial measures.

Global value chains have helped the growth of East Asian economies (e.g. Japan, China, and South Korea) and are a path to prosperity for India too to leverage its demographic dividend.

Significance of GVCs for India:

  • Increase India’s integration with world markets.
  • Facilitate network products and increase value addition in India.
  • Huge job opportunities.
  • Technological benefits due to foreign investments.
  • Routing of global products leading to India’s increased earning of foreign exchange.
  • Help in India’s infrastructural development through investment.
  • Absorb India’s semi skilled labour.

Concerns associated with GVCs:

  • Vulnerability to global shocks increases.
  • Can lead to increase in volatility of rupee.
  • India is still shy to open various sectors where vulnerable sections of population are engaged.
  • Can lead to increased volatility in Indian stock markets.
  • May be problematic for MSMEs and some traditional sectors.

Measures for India to reap benefits of GVCs:

  • Focus on value chains to ascertain the specialization.
  • Increasing demand-oriented skilling.
  • Participating in value addition and small-scale intervention rather than focusing on final products.
  • Opening up the economy and de-reserving sectors to create free flow of goods.
  • Focus on increasing MSMEs participation in global value chains to integrate them.
  • Policy making to reduce the intervention in labour laws, regulatory provision, and various compliances.
  • Exploring capital account convertibility and making rupee resilient.

Global value chains (GVCs) are critical to India’s labour intensive growth and pushing people out of poverty by taking care of the increasing demography. GVCs have the potential to create 5 crore jobs in India by 2025, so government needs to consider this on priority basis through consultations at global level.

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