India and China in Manufacturing GVCs: Participation, Gains, and Comparative Advantage

Abstract

The restructuring of global production through Global Value Chains (GVCs) deeply alters trade patterns in addition to comparative advantage. This paper undertakes a comparative assessment of India’s and China’s manufacturing integration into GVCs between 1995 and 2020, also it employs OECD, WTO TiVA data to decompose gross exports into domestic and foreign value-added components. This analysis studies participation using forward and backward linkages, measuring gains through the forward-to-backward linkage ratio. It also examines competitiveness at the time when it uses the customary “Revealed Comparative Advantage” (TRCA) and also the “Normalized Revealed Comparative Advantage” (NRCA) indices. The results highlight divergent trajectories within. India did participate much more in GVC, as participation went up from 25 to 34 percent. It was backward linkages that mainly drove this increase since they reflected a growing reliance upon imported intermediates. Gains fell sharply before a slight rebound, and this implies weak local knock-ons. China, in contrast, consistently integrated itself much more deeply since gains rose quite steadily since industries that are technology-intensive shifted in competitiveness. Sectoral evidence does indicate that domestic value-added shares declined in India’s employment-intensive industries, while China structurally upgraded toward capital- and knowledge-intensive sectors. The findings underscore that India has integrated broadly but shallowly, whereas China has integrated to a deeper and more helpful extent. Policy implications say India should strengthen local supply chains, encourage tech-heavy output, and advance obscure leaders for lasting GVC gains.

JEL Classification: F14. F15. F23