Unlocking India’s Potential: Harnessing global value chains for sustainable growth

India has made progress in moving up GVCs in recent years, with the share of GVC-related trade in its gross trade rising in 2022

By Suryaprabha Sadasivan & Saptarshi Lahiri

As India strives to achieve its vision of Viksit Bharat by 2047, one of the most significant opportunities lies in deepening its integration into Global Value Chains (GVCs). Presently, around 70% of global trade involves GVCs, underscoring their pivotal role in the global economy. However, the last decade has exposed the fragility of these networks. Trade wars, geopolitical tensions, and the lingering effects of the pandemic have forced countries to rethink their supply chain strategies.

With India gearing up to establish its place as a critical player in the new global economic and geopolitical order, deeper integration into GVCs is an unmissable opportunity—not just from an economic growth perspective but also to build resilience and future-proof our economy from disruptions caused by geopolitical upheavals.

India has made progress in moving up GVCs in recent years, with the share of GVC-related trade in its gross trade rising from 35.1% in 2019 to 40.3% in 2022. Initiatives such as the Production-Linked Incentive (PLI) scheme and the Districts as Export Hubs programme have catalysed this progress. However, when compared to economies like Japan or South Korea, our integration remains modest. If we do not accelerate our efforts, we risk being left out of the sweeping global shifts in manufacturing and trade. On the flip side, it also presents an unprecedented opportunity. By prioritising industries of the future—clean technology, e-mobility, semiconductors, biotechnology, and artificial intelligence—India can shape a new narrative on its role in GVCs.

To maximise its GVC potential, India could focus on sectors such as green chemicals and electric vehicles (EVs), where it has both capacity and growth opportunities. As the sixth-largest chemical producer globally and one of the top chemical exporters, India has a solid foundation to lead the green chemical revolution. Chemicals, particularly petrochemicals, serve as a backbone for downstream industries such as agriculture, textiles, automobiles, and cleaning products. Petrochemicals form the base of 95% of all manufactured goods worldwide but come with a high environmental cost. The global transition to sustainability is driving demand for bio-based alternatives and renewable feedstocks. India, with its strong manufacturing base and innovation potential, can capitalise on this shift. By doing so, India can capture a key share of the upper end of the global value chains in the sector, areas driven by R&D and innovation, and also close the gap in its net-zero targets.

While India is well integrated into GVCs in the internal combustion engine (ICE) segment of the automotive sector, its EV ecosystem remains underdeveloped. By scaling its electric vehicle (EV) and battery ecosystem, India can strategically position itself in the high-value segments of GVCs. The EV transition is not just about decarbonisation; it’s about securing a foothold in the future of mobility. The battery supply chain, which holds huge promise for the future, is one such area for India to champion. It could tap into opportunities emerging from the rising domestic demand for EV batteries and extract valuable critical minerals like lithium, cobalt, and nickel from recycled batteries, of which there are no known reserves in the country. This could reduce import dependence and position India as a sustainable hub for EV manufacturing. The global dominance of China in this space is undeniable. But with favourable policies and a focus on innovation, India can carve out a significant role in the global EV landscape.

Merely integrating itself into GVCs is not enough. India needs a strategic roadmap that lays out pathways to maximise the benefits of integration—economic growth enablement being an obvious one supported by high-value job creation, higher living standards, and technological growth, among others.

To unlock this potential, the key levers include: a) enabling a policy environment that ensures reduced barriers to entry, simplified compliance processes, and incentives to promote investments—both domestic as well as foreign direct investment (FDI); b) prioritising R&D and innovation, which are essential for integrating into global value chains (GVCs), particularly in high-tech sectors like green chemicals and battery recycling. Collaboration between academia, industry, and government is critical. Programmes like the Bio-E3 policy are promising but need sustained investment and scaling; c) aligning skilling efforts with the demands of high-growth, future-ready industries like green chemicals and EVs, which require specialised expertise.

If India fails to deepen integration into GVCs, it could be left behind in the global economic and geopolitical transformation. The missed opportunity would not just be economic growth—it would compromise our power to influence global supply chain dynamics and leverage the potential of critical sectors of the future. In a world where supply chains are increasingly shaped by geopolitical considerations, India's limited integration could weaken its position in forging alliances and determining the rules of the global trade order.

(Suryaprabha Sadasivan, Senior Vice President & Saptarshi Lahiri, Manager, Chase India.)

Views are personal, and do not represent the stand of this publication.