- The Chief Economic Advisor believes that India’s can reap considerable benefits from participating in global value chains.
- He points to China’s example of only assembling the iPhone 7 and the iPod, instead of producing it from scratch.
- The Survey postulates that global value chains can result in job and value creation for India’s economy.
According to the Indian Economic Survey, the foreign value that is added to exports is normally higher than if the inputs were sourced locally. However, because the scale of operations is so large, participation in global value chains can trigger a multiplier effect. An effect that results in more value and more jobs.
“The scale effect creates millions of jobs and is therefore particularly suited for implementation in a labour-intensive economy such as India,” said the Survey.
Following the example set by China
It argues that India has massive potential to become a hub for final assembly of "network products". These global value chains are largely controlled by global tech giants like Apple, Samsung and Sony among others. Most of the products produced by these companies aren't produced in only one country. Instead, production is distributed to different countries around the world with specialisation in select parts of the process.
China, for instance, has a comparative advantage when it comes to assembly which it has capitalised on by being a part of the Apple iPod value chain. Even though it only made $4 off every iPod, which retailed for $144 in 2008 — the aggregate domestic value addition was $219 million. This is because, overall, 54.83 million iPods were sold globally.