International Journal of Business and Economics Volume 21, No. 1 June, 2022

Evidence from India's Sectoral Performance in Integrating Technological Exports with Global Value Chains

Kashika Arora

Indian Institute of Foreign Trade, New Delhi, India.

Areej Aftab Siddiqui

Indian Institute of Foreign Trade, New Delhi, India.

Abstract

This paper captures India's sectoral performance of two very important manufacturing sectors, namely- Textile & Clothing (T&C) and Electronics & Hardware (E&H), possessing varying technological capabilities and competitive trade performance. By considering advanced time-series analysis from 1991 to 2017, a comparative performance in terms of the linkages between trade and technology is elaborated. For T&C, the process of cointegration reveals that there exists significantly positive long-run association between GFCF, extensive margin and RCA with gross exports. There is also evidence of bi-directional granger causality between gross exports and RCA, as well as one-way causation from gross exports to intensive and extensive margins. The dynamic performance of the variables is further investigated using the impulse response function. The impact of technology on involvement in global value chains (GVCs) in terms of increasing exports is not immediately apparent. However, the association is established through indirect causation routes. However, for E&H only short-run relationship exists between intensive margin, production value and lagged gross export value with gross exports. There exists no long-run relationship, but a silver lining in the form of various sectoral policies targeting GVC participation and thus increasing export share need to be boosted. Hence, this paper provides a direction to the policy-makers in the form of aiming well-timed and informed policies for these two sectors.

Keywords：ARDL Cointegration, GVC Linkages, FDI, Trade Margins, R&D Expenditure, Revealed Comparative Advantage.

JEL Classifications：F14, F60, O19.

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