Abstract

Global Value Chains (GVCs) today account for more than 50 per cent of world merchandise trade, making them the dominant mode of organising international production. India, in spite of having a large domestic market, a young working-age population, and a well-established services sector, has not been able to integrate deeply into manufacturing-oriented GVCs. Its share in global exports stands at around 1.3 per cent, which is well below its economic potential. India’s GVC participation remains largely of the forward-linkage type, meaning the country supplies raw materials and basic intermediates rather than participating in the more complex, higher value-added stages of global production networks. This paper examines the policy environment that shapes India’s GVC participation. It traces the history of India’s inward-looking trade and industrial policies and the structural barriers that have resulted, assesses how recent reforms like the Production Linked Incentive (PLI) scheme, the Foreign Trade Policy 2023, the National Logistics Policy, and the PM Gati Shakti Master Plan address these gaps, and places these reforms within the broader context of global supply chain shifts triggered by geopolitical tensions, the COVID-19 pandemic, and the China Plus One strategy. Drawing on secondary data, existing literature, and policy documents, the paper argues that while the direction of current reforms is broadly correct, their coverage and depth of implementation remain inadequate. Key constraints including high logistics costs, weak MSME-GVC linkages, limited lead firm development, and insufficient regional trade integration continue to hold India back. The paper recommends a coordinated set of measures spanning trade policy stability, MSME supplier development, digital infrastructure investment, and regional economic integration to enable India to move up the value chain. The implications for employment generation, productivity growth, and inclusive development are also discussed.

Keywords: Global Value Chains, India, Policy Reforms, PLI, Trade Facilitation, MSME, Economic Integration