Technology Exports and Global Value Chain Linkages: A Comparative Sectoral Study of India

Abstract

Technology being incorporated in products, intermediate inputs and processes varies from sector to sector. Using annual time series data (1991–2017), a comparative performance of two sectors, namely, a high-tech (electronics and hardware) and low-tech (textiles and clothing), is undertaken to elaborate on the linkages between trade and technology. The empirical analysis in the form of auto regressive distributive lag (ARDL) testing approach to co-integration concludes that there is strong evidence of positive long-run relationship between extensive margin, gross fixed capital formation and revealed comparative advantage (RCA) with gross exports (GE) for the textile and clothing sector. Also, there runs a bidirectional Granger causality between RCA and GE and unidirectional Granger causality from GE to extensive and intensive margins and production value. However, there is a lack of evidence of long-run co-integration in the electronics sector. Still, a short-run positive causal relationship exists between lagged values of GE, intensive margin and production with GE. Together, the impact of these variables on the sector’s export performance varies, thus posing a challenge as well as providing a direction for the policies to reap further from this potential nexus of trade, investment and global value chains.