Economy

KEY POINTS

·        China has served as the key node in Asian Global Value Chains (GVC) as a centre of processing and assembling intermediate inputs for re-exporting to the world market.

·        It played a major role in ensuring that manufactured exports from Asia have remained cost-competitive globally.

·        Measured by value, intra-regional trade flows in Asia have risen in importance over the past two to three decades.

·        On average, the share of intra-regional trade in total Asian trade in goods has risen, comparable to that of the European Union (EU).

·        Meanwhile, Asia’s share of world exports has also risen.

·        Nonetheless, much of this increase was due to China’s emergence as an export powerhouse and a key player in both intra-regional and extra-regional trade.

·        Excluding China’s exports as well as intra-regional export flows to China, Asia constituted only about one-fifth of total world exports throughout the 1990-2017 period.

·        A similar pattern can be observed for imports.

·        As a result, China’s trade performance has had a major impact on Asia’s intra-regional and extra-regional trade as a whole.

Implications for India

·        Unlike China, India has not been able to fit prominently into the Asian GVCs.

·        The Regional Comprehensive Economic Partnership (RCEP) was expected to be the catalyst for this to happen.

·        However, there is a growing belief in policy circles in India that such trade agreements have been the cause of limited success of the much-touted “Make in India” scheme as well as the ongoing “job crisis”.

·        However, the trade agreements per se ought not to be used as a scapegoat for India’s manufacturing and employment slump.

·        India’s anaemic manufacturing performance and inability of India to plug effectively into regional global supply chains is the sustained supply-side distortions and rigidities as well as relatively high trade costs in India.

·        Indian manufacturers consequently have found it hard to benefit from the trade liberalization efforts and instead have been faced with large-scale imports of cheaper goods.

·        India should focus on leapfrogging and getting prepared to deal with the rising influence of China in Asian trade.