Published: 10th Nov, 2023
Context:
NITI Ayog CEO re-emphasised on India’s need to reintegrate into Global Value Chains.
What are Global Value Chains?
- Global Value Chains (GVCs) represent the intricate networks of international production in which different stages of the production process for goods and services are carried out across various countries.
- These chains involve multiple firms and suppliers worldwide, each contributing different value-added components or tasks to create a final product or service.
Why is integration with GVCs important?
- Economic Growth: GVCs offer opportunities for countries to participate in global trade and production networks, promoting economic growth by leveraging their unique strengths in the production process.
- Efficiency and Specialization: It allows each country to specialize in specific tasks, focusing on what they do best. This specialization leads to higher efficiency and better-quality products.
- Access to Markets: Participation in GVCs provides access to global markets, allowing countries to sell their products and services worldwide, thereby expanding their customer base.
- Technological Advancements: Integration into GVCs often brings access to new technologies and knowledge transfer, fostering innovation and development within industries.
- Job Creation: GVCs create job opportunities within participating countries, especially in sectors where they have a competitive advantage, leading to increased employment and economic stability.
- Economic Resilience: Diversification through GVCs helps nations to reduce risks associated with over-reliance on a single industry or market, making their economies more resilient.
Challenges
- Infrastructure Deficiency: Inadequate infrastructure in transportation, logistics, and technology hampers efficient connectivity and integration within global trade networks.
- Complex Regulatory Environment: Cumbersome and complex regulations, bureaucratic red tape, and unclear policies create barriers and hinder the ease of doing business within GVCs.
- Skilled Labor Shortage: The need for skilled and technologically adept labor often outstrips the available workforce, affecting the country's competitive edge in certain sectors.
- Limited Access to Finance: Insufficient access to capital and financing options for businesses, especially smaller enterprises, impedes their ability to invest and grow within GVCs.
- Low Research and Development Investment: Limited R&D investment and innovation hinder the country's ability to develop and incorporate advanced technologies into production processes.
- Environmental and Ethical Concerns: Compliance with environmental and ethical standards poses challenges for some industries, impacting their participation in certain segments of GVCs.
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