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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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Introduction

Asian international production networks (IPNs) started by the changes of MNCs’ strategies on international fragmentation of production in responding to rapid globalization, technology changes, and increasingly open trade and investment environments in Asian countries in the 1980s. The phenomenon was fuelled in the 1990s by the opening of China which has emerged as a global centre for manufacturing assembly. Currently, the growing IPNs have a significant impact on merchandise trade patterns and regional integration among Asian economies. The phenomenon has led to dramatic expansion in trade in parts and components with a notable development in exports by Asia-Pacific. The share of the Asia-Pacific region in total world exports of parts and components has been increasing since the 1990s, especially during the past 10 years (figure 1)

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