Comment on “Joining Global Production Networks: Experience and Prospects of India”

• Author: Shujiro Urata
• Date: 01 January 2019
• DOI: http://doi.org/10.1111/aepr.12249
• Published date: 01 January 2019

Comment on “Joining Global Production

Networks: Experience and Prospects of India”

Shujiro URATA†

Waseda University

JEL codes: F13, F21, F23

Accepted: 1 August 2018

The study of Athukorala (2018) examines India’s experiences in participating in global

production networks, which have been exploited by many East Asian countries includ-

ing China and several Association of Southeast Asian Nations (ASEAN) countries, to

result in rapid economic growth. He finds that India has not been successful in partici-

pating in global production networks.

Athukorala identifies various factors behind India’s lagging in the participation of

producer-centered global production networks. They include rigidities in labor laws,

restrictive trade and investment policy regimes, unpredictable taxation policies, poor

connectivity to ports and airports (underdeveloped infrastructure), power shortages,

and cumbersome customs controls. Athukorala recommends that India and the Indian

government complete the unfinished reform agenda, encompassing both trade and

investment policy reforms, and “behind-the-border”reforms. He particularly empha-

sizes the importance of effective investment promotion, as multinational enterprises

are the main players in setting up and managing global production networks.

In assessing Prime Minister Modi’s pet “Make-in-India”project, whose goal is to

increase the share of manufacturing in India’s production and exports, Athukorala

argues that these targets will be met if India were to successfully get involved in global

production networks. Having made these points, Athukorala asserts that the policies

adopted by the Modi government will not deliver the expected outcomes because these

policies are a return to the old control system, which prevented India from participat-

ing in global production networks.

These observations of Athukorala, which I agree mostly, seem to indicate either

that the Modi government does not understand the importance of getting engaged in

global production networks to achieve the proposed goal of increasing the importance

of manufacturing industry in the Indian economy, or that the Modi government does

understand the importance, but it has implemented inappropriate policy. Regardless of

which is the case, what is clear is that there is strong opposition to trade and foreign

direct investment (FDI) liberalization in India.

†Correspondence: Shujiro Urata, Graduate School of Asia-Pacific Studies, Waseda University,

1-21-1 Nishiwaseda, Shinjuku,Tokyo 169-0051, Japan. Email: surata@waseda.jp

144 © 2018 Japan Center for Economic Research

doi: 10.1111/aepr.12249 Asian Economic Policy Review (2019) 14, 144–145