Role of International Trade and Industrial Upgrading: Assessing GVC Linkages for Indian Manufacturing Firms
Abstract
Trade supports industrial upgrading by expanding access to new markets, advanced technologies, and skills. It also enhances output, improves product quality, and promotes sustainable outcomes, thereby strengthening a nation’s position within global value chains (GVCs). This article aims to explore the effects of trade linkages on various dimensions of industrial upgrading for Indian manufacturing firms from a GVC–Sustainable Development Goal–Environmental, Social, and Governance perspective at the micro level. The study used data on 17,545 firms in the manufacturing sector from the Center for Monitoring Indian Economy Prowess database, spanning 2009–2023. The study examines how GVC backward and forward linkages are linked to the economic, social, technological, and environmental dimensions of upgrading. Employing the system generalized method of moments estimation technique, the findings indicate a positive correlation between upgrading (economic and technological) and GVC integration. For high-tech manufacturing, export intensity is positively associated with pollution control expense. This is plausible because high-tech firms invest in green initiatives to maintain their reputation and market stature. For low- and medium-tech firms, import intensity is directly linked to pollution control expenses, as these firms continuously evolve, upgrade, and comply with international standards. JEL Classification F14, F23, F36