For years, developing economies treated integration with world markets as a development strategy. More exports, more foreign investment, more links with global production networks were taken as progress. The Asian Development Bank’s Asian Development Policy Report 2026 makes a narrower point. Global value chains raise income only when economies acquire the capability to move into higher-value functions. Participation without upgrading leaves countries with thin margins and limited domestic gains.
Global value chains reward upgrading
Developing Asia and the Pacific has become a major hub of global value chain trade. Its share of global GVC trade doubled from 9% in 2000 to 18% in 2023. The region now accounts for about a third of global value chain trade. GVC trade itself remains large, at 46% of global trade in 2024, even after recent shocks to trade and investment flows.
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The income effect is material. The ADB estimates that a 10% rise in GVC participation is associated with a 0.45% increase in per capita income growth. It also finds that a 10% increase in network centrality is associated with a 0.8% increase in per capita income growth. The point is not that any trade link will do. Countries gain more when they become hard to replace in production networks.
The growth record bears this out. Economies that upgraded within GVCs grew at about 6% a year. Those that entered GVCs without upgrading grew at 4.4%. Economies that remained peripheral grew at 3.9%. For India, this distinction matters more than the headline export number. Assembly, contract production and low-margin processing can expand output without giving domestic firms technology, design capability, supplier depth or pricing power.
India’s GVC strategy needs services
India’s manufacturing debate still leans on scale, labour cost and export incentives. The ADB report points to a different source of competitiveness. Modern production depends on logistics, finance, design, research, after-sales support, software, data systems and standards compliance. These services decide how much value stays with the producer.
This suits India better than a late imitation of East Asia’s factory-led path. India enters this phase with stronger capabilities in digital services, back-office delivery, engineering support and knowledge-intensive work than most economies had at comparable income levels. That does not make manufacturing less important. It means manufacturing policy cannot be separated from services policy. A factory that lacks design capability, logistics reliability, testing capacity and standards certification will remain a supplier, not a value-chain leader.
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The report’s evidence on servicification underlines this. Services exports in developing Asia and the Pacific have more than doubled since the global financial crisis. Around half of services value-added exports in many Asia-Pacific economies are embodied in manufactured goods. For India, the practical lesson is plain. Electronics, auto components, machinery, pharmaceuticals and green technologies will not move up the value chain on production-linked incentives alone. They need services embedded in production.
CBAM turns carbon into trade capability
Environmental compliance is also becoming a trade capability. The EU Carbon Border Adjustment Mechanism is already changing the economics of carbon-intensive exports. A June 2026 Nature Climate Change study on EU–India steel trade found that high-emission Indian steel firms cut export quantities and revenues to the EU during CBAM’s reporting phase, while low-emission firms maintained exports. It also notes that India’s steel emissions intensity is high relative to the EU average for comparable product mixes.
This changes the meaning of competitiveness. Carbon intensity, traceability and verified emissions data now affect market access and price realisation. In steel, aluminium, cement, fertilisers and other exposed sectors, exporters cannot treat decarbonisation as a domestic climate obligation alone. It is becoming part of trade infrastructure.
India’s industrial policy therefore has to connect energy transition, standards bodies, testing capacity and export promotion. Firms that can prove lower embedded emissions will have better access to higher-value markets. Firms that cannot will face discounts, compliance costs or diversion to lower-margin markets.
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GVC gains bypass small firms
The ADB report is also a warning against assuming that GVC integration is automatically inclusive. Between 2000 and 2023, population-weighted within-economy inequality in developing Asia and the Pacific rose by 6.7%. The gains went disproportionately to larger firms and skilled workers. Small firms were 25% less likely than large firms to participate in GVCs.
This is relevant for India, where most employment sits outside large, formal exporters. Foreign investment can create enclaves if domestic suppliers do not acquire the standards, finance, technology and managerial systems needed to supply anchor firms. Ports and industrial parks help, but they do not by themselves create capable suppliers.
India’s policy task is therefore more institutional than rhetorical. Customs procedures, ports, power supply, digital infrastructure, standards agencies, testing labs, skilling systems, supplier-development programmes and trade finance have to work together. A weak link limits the rest. Export promotion without firm upgrading produces shallow integration. Skills without market access produce underused labour. Investment without domestic linkages produces enclaves.
The next phase of India’s global integration will not be judged by export volume alone. The harder test is whether participation builds domestic technological capability, raises productivity, expands local supplier networks and creates better jobs. Joining global value chains was the easier part. Climbing them is the development challenge.
Dr Rajeev Verma is Assistant Professor of Economics at the University of Delhi.