Global Value Chain Development Report 2025

India's GVC Ambitions: A 2.8% Share and the Roadblocks Ahead

In 2024, India climbed into the top 10 economies contributing to global Domestic Value Added (DVA) in exports, securing a 2.8% share for the first time—a recognition of its expanding role in digital trade and business process outsourcing. Yet, this milestone sits uneasily alongside persistent logistical inefficiencies, regulatory opacity, and sustainability challenges that put India’s Global Value Chain (GVC) ambitions at odds with its systemic constraints.

The Policy Landscape Shaping GVC Integration

At the heart of the debate is the growing strategic pivot among nations toward resilience in their GVC systems. The Global Value Chain Development Report 2025, published by the WTO, details how major economies are recalibrating their supply chains. This recalibration highlights shrinking dependence on foreign value chains through reshoring and regionalization efforts—a trend driven by geopolitical instability, supply-chain shocks, and the allure of self-reliance.

India’s GVC narrative is underlined by specific sectoral wins. Boosted by its digital services exports, alongside the rise of electric vehicles as drivers of modern supply chains, India’s role is becoming more multifaceted. Reports show business-process outsourcing and ICT-centric exports have surged, matching the Philippines in high-value services. However, comparative weaknesses remain glaring. India's share, though growing, is a mere fraction of China's dominant presence in global GVCs, especially in high-tech manufacturing or critical minerals like lithium, where China leads extraction, processing, and supply chains.

Reshoring and Regionalization: The Double-edged Sword

The WTO Report highlights that economies such as the United States, European Union, and China are significantly reducing foreign dependence, with reshoring efforts creating robust local supply networks. India, however, may face marginalization under this trend if its infrastructure bottlenecks and policy instability persist. While the world leans towards regionalized efficiencies, India struggles to exploit geographical proximity due to its limited free trade agreements (FTAs). The absence of an FTA with the EU—a crucial trading partner—has kept tariff barriers high for Indian goods like textiles and electronics.

The irony is stark. Despite talks of promoting Atmanirbhar Bharat (self-reliance), India's participation in advanced manufacturing GVCs remains limited due to supply chain capacity constraints. For instance, high logistics costs continue to erode competitive advantages. India’s figure—averaging 13-14% of GDP against 8-10% in developed economies—reinforces the need for cost-efficient infrastructure and processes.

The Case in Favor: India’s Strengths

India's rise in digital services and business-process outsourcing marks its growing integration into knowledge-intensive GVC segments. According to the WTO report, services now account for over one-third of value added in manufacturing exports globally. Unlike traditional assembly lines, digital services demand fewer physical inputs and are less impacted by infrastructural deficiencies. For Indian firms—especially SME exporters—this offers a window of opportunity to upscale faster than competitors tied to manufacturing bottlenecks.

Further, the transition to sustainable trade offers India avenues for repositioning. While critical minerals dominate EV supply chains, India’s evolving production capacity in battery manufacturing and solar panels could position it as a semi-significant player in GVCs linked to green innovation. Policy moves such as the PLI scheme for ACC Battery Storage have attempted to capitalize on this emerging sector.

The Case Against: Institutional Weaknesses

Yet the optimism must be tempered. India’s GVC participation continues to face structural hurdles that global firms find prohibitive. Key among these is regulatory uncertainty. From tax complexities under the GST structure to abrupt policy reversals such as the ban on IT hardware imports earlier in 2023, the signals to investors are mixed, at best.

Additionally, infrastructure inadequacies undermine GVC aspirations. High maritime freight costs, port inefficiencies, and multi-modal transport delays inflate input costs for exporters, particularly in manufacturing. The delay-prone Sagarmala and Bharatmala projects, despite their ambition, have failed to meet original timelines—raising questions about India's preparedness to integrate seamlessly into global production networks.

Finally, compliance with global ESG standards remains a glaring obstacle. Carbon border measures, like the EU’s Carbon Border Adjustment Mechanism set to launch in 2026, could drastically raise costs for Indian exporters in ceramics, steel, and textiles—forcing them to choose between environmental investments or losing competitive pricing margins.

What South Korea Did: Lessons from a High-Tech Pivot

South Korea offers a revealing counterpoint. Confronting logistical inefficiencies in the 1990s, the nation invested heavily in port modernizations and digital logistics systems, creating one of the world's most efficient maritime networks. Moreover, strategic FTAs secured preferential access to the EU, US, and ASEAN markets. South Korea’s targeted R&D investments—particularly in semiconductors and display technologies—helped it dominate high-value GVCs.

For India, the lessons are two-fold. First, maritime infrastructure demands not just physical upgrades but operational streamlining. Second, aligning technological investments with training ecosystems—akin to South Korea’s 'Brain Korea 21 Program'—could bridge India’s glaring skill gaps in advanced manufacturing.

India’s Fork in the Road

The WTO's findings simultaneously spotlight India’s potential and bottlenecks. While its 2.8% share of global DVA in exports signals progress, achieving parity with regional leaders will require much deeper reforms. The risks posed by reshoring trends are growing, particularly as major economies look inward.

India must decide whether its GVC future lies primarily in digital services or whether manufacturing participation is worth the steep climb. Much will depend on how closely it aligns infrastructure upgrades with sustainable trade practices and its ability to secure meaningful FTAs with strategic partners.

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