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India: A New Player in Asian Production Networks?

image of India: A New Player in Asian Production Networks?
While the IPN phenomenon has accelerated trade and investment linkages between countries in East and South-East Asia, the remainder of the region has not matched those countries in this process. The objective of this study is to explore the reasons for this by using India’s performance in the Asian IPNs as a case study for other countries that are trailing behind in this area. The study seeks to identify the reasons why India has performed below its potential in this new form of international division of labour, even though that country possess several supportive factors including: (a) the sheer size of the economy and population; (b) a large pool of engineers; (c) relatively sound intellectual property protection; and (d) an increasingly open trade and investment climate resulting from progressive economic reforms.

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Integrating into Asia’s International Production Networks: Challenges and prospects for India

During the past three decades, IPNs were created by multinationals in labourintensive manufacturing industries among East and South-East Asian countries. This phenomenon, in which FDI played a major role, was fuelled by the adoption of export-led outward-oriented growth strategy by Asian countries since the 1980s decade. In stark contrast, India, one of the world’s currently emerging and rapidly growing economies in terms of GDP growth adjusted for purchasing power parity (PPP), has been largely left out of such global division of labour. A plausible reason is that India strictly followed a self-reliance and import-substitution growth until about 1991, when it adopted major policy reforms towards a more outward orientation.

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