View: India must achieve self-reliance through value chains

The Covid-19 pandemic has put various countries including India in a situation where the supply chains are being reconfigured. Globalisation does include an element of volatility and as a result, when things go wrong, the economy of a nation is bound to take a hit.

India’s GDP, as per the IMF, is expected to have been reduced by 8 percent in FY 21. The merchandise exports which are an important segment of the economy, also shrunk by over 7 percent in FY 21. It is vital to note that in India’s target of US$ 5 trillion, 20 percent component is attached to the exports of goods and services.

The GOI’s self-reliance program aims “to make the country and its citizens independent and self-reliant in all senses”. Five pillars, namely, Economy, Infrastructure, System, Vibrant Demography and Demand, have been outlined for this campaign to succeed.

However, what is essential to understand is that in the modern world where India is integrated with the outside world, true and sustainable growth cannot come without aligning strategically with the Global Value Chains (GVCs).

India’s GVCs Scenario

The OECD’s Trade-in Value Added (TIVA) database provides insights into global supply chains, beyond the traditional trade numbers. India’s backward participation, which is the foreign value-added share of gross exports, was estimated at 19.1 percent in 2015, up from 18.8 percent in 2005. It had reached as high as 25.1 percent in 2012.

China saw some similar trends. The TIVA decreased from 26.3 percent in 2005 to 17.3 percent in 2015, but China’s exports are 9x to 10x when compared to India. Nations such as Vietnam have backward participation of over 40 percent.

On the forward participation front, which is an indication of how India is adding value to the foreign exports as a share of its own gross exports, it is revealed that India’s forward participation has declined from 16.6 percent in 2005 to 14.9 percent in 2016. For China, this increased from 15.6 percent to 17.5 percent, during the same period.

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