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Need of India to reintegrate into Global Value Chain

  • Category
    Economy
  • Published
    9th 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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