SYLLABUS

GS-3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

GS-2: Important International Institutions, agencies and fora - their Structure, Mandate.

Context: The 5th edition of the Global Value Chain Development Report 2025 was recently released by the Asian Development Bank (ADB), World Trade Organization (WTO) and other partners. 

More on the News

• The Report titled, “GVC Development Report 2025: Rewiring GVCs in a Changing Global Economy”, is the fifth in a biennial series.

o It is a joint production of the ADB, the Research Institute for Global Value Chains at the University of International Business and Economics (UIBE), the Institute of Developing Economies - Japan External Trade Organization (IDE-JETRO), the World Economic Forum, and the WTO Secretariat. 

• The central finding demonstrated that Global value chains (GVCs) have shown remarkable resilience despite escalating geopolitical tensions, climate pressures, financial instability, and the disruptions caused by the COVID-19 pandemic. 

• The report identifies 180+ agreements signed by 2024 dealing with digital trade, critical minerals, and supply chain security—indicating a shift away from traditional, broad regional trade deals.

Key Findings of the Report 

• Recent Trends in GVC: The global value chains (GVCs) remain the backbone of the world economy, accounting for about 46.3% of global trade in value-added terms, only slightly below the 2022 peak of 48%. 

• Structural Shifts in GVC Structure: Services have overtaken goods in global value chain participation rates since 2019, showing steadier growth after the COVID-19 pandemic, compared to the volatility of goods trade. 

o Further, services value added now represents more than one-third of the content embedded in manufacturing exports. 

• Diversification of Global GVC: Although high-global value chain trading economies still account for most of the global GVC-related trade, their collective share has declined from 76% in 2010 to 63.6% in 2024, reflecting the gradual integration of other economies into GVCs.

o Asia, Europe, and North America account for the majority of GVC trade, while Latin America and Africa lag in GVC and trade integration. 

• Technological Change: Digitalization, automation, AI, and advanced robotics are reshaping production methods and enabling more distributed and resilient manufacturing. 

• India Specific Findings: India has seen a consistently growing integration into GVCs, and has risen to become part of the top 10 value-adding economies since the onset of the pandemic, with a share of 2.8% of global DVA in exports in 2024.  

• Challenges in Global Value Chains:

o Trade Costs and Uncertainty: policy-driven increases in trade costs, as well as growing geopolitical tensions, are especially harmful for developing regions that lack strong multinational investment footprints.

o Inequality: Regional hubs in Asia, Europe and North America still account for the majority of GVC trade, while emerging nodes in Latin America and Africa remain mainly on the periphery of investment and trade integration compared to the main regional hubs.

o Finance Inequity: severe shortfall in global trade finance—over US$1 trillion per year—as a continuing barrier for small and emerging economies.

Significance of the Report

• Aligning with the WTO’s vision of “re-globalization”: The report has reaffirmed that globalization is far from over, and global value chains remain indispensable.

• Signals Reconfiguration and Diversification of GVCs: The shift reflects both market forces and deliberate policy choices to diversify risk and attract new investment.

• Structural Shifts Towards Digital and Services: services have overtaken goods in GVC participation, showing “greater resilience” post-pandemic, especially digitally deliverable services such as finance, telecommunications, and IT.

• Sustainable and Inclusive Growth: The report analyses environmental governance, carbon pricing, and sustainability challenges — an important input for green industrial policies and achieving global climate goals.