Has India Upgraded Its Position in Global Value Chains After Major Trade Shocks? Evidence from BEC-Based Trade Decomposition

AbstractThis paper explores the question of whether India has become better placed in global valuechains (GVCs) since the severe global trade shocks, namely the COVID-19 pandemic and thepost-2021 China-plus-one reshaping of supply chains. Using merchandise trade data of theHS2 level of the items traded between the years 2018-19 and 2024-25, the study categorizesexports and imports into the Broad Economic Categories (BEC) in order to distinguishbetween consumption, intermediate and capital goods. The identification of compositionalchanges in the trade structure in India is done with the help of a fixed-effects regressionframework in which the category of BECs is interacted with the global shock signals.The study finds that despite the fact that both COVID-19 and China-plus-one transition arelinked with increases in the total volumes of Indian trade, neither of the two shocks hadstatistically significant reallocation of India toward capital or intermediate goods, as opposedto consumption goods. These findings suggest that current global shocks were more of a scaleshock than an agent of functional upgrading in GVCs. The role which India plays in GVCsdoes not seem to be weakened but is structurally stable and there is little indication oftransition to higher value-added segments.