Trade Integration and Production Disintegration of Manufacturing Industries: India in Global Platform

Abstract

The bulk of the world trade in commodities now a days consist of intermediate goods, which play an essential role in production and creation of value-added. As a consequence, the global production process is getting much more integrated today than ever before. To understand and examine this internationalisation in Indian manufacturing industries, using World Input–Output Database (WIOD), we have estimated the foreign and domestic value-added contents in export and output of Indian manufacturing for the period 2000 to 2014. Further, to complement this analysis, we have also performed regression estimations to identify the relationship between export, imported inputs use, and output growth of Indian manufacturing industries. Our study reveals low usage of domestic inputs use and more usage of imported inputs. These indicate stronger backward linkages in production and weak forward linkages in global consumption and production networks. Regression analysis also strengthens the finding of higher backward participation of the manufacturing sector. We have employed panel vector error correction model, fully modified ordinary least square and dynamic OLS models. Our results reveal a robust long-run causality between imported inputs usage and export-growth of the sector. JEL Codes: C33, C67, F14, F15