Global Value Chain Development Report 2025

Syllabus: GS3/Economy

Context

• The Global Value Chain Development Report 2025 has been released by the World Trade Organization (WTO).

What is the Global Value Chain (GVC)?

• A Global Value Chain (GVC) refers to the full range of activities involved in producing a good or service, when these activities are spread across multiple countries. 
• These activities include: Design & R&D, Sourcing of raw materials, Production and assembly, Logistics and distribution, Marketing, sales & after-sales services.
  • Each stage adds value, and different countries participate in different stages based on their comparative advantage.
• Example: A smartphone may be designed in the US, components manufactured in East Asia, assembled in Vietnam/India, and sold globally.

Major Findings of the Report

• Recent Trends: GVCs remain central to international trade, accounting for about 46.3% of global trade in value-added terms, only slightly below the 2022 peak.
  • Firms and governments are prioritizing resilience e.g., diversification of suppliers alongside efficiency.
• India Specific Findings: India, alongside the Philippines and several African economies, has strengthened its position in business-process and digital service exports.
  • India 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 Domestic Value Added (DVA) in exports in 2024.
  • This reflects India’s growing role in digital trade and services within global value chains.
• Shifts in GVC Structure: Services have outpaced goods in GVC participation,  accounting for more than one-third of value added in manufacturing exports.
• Regional Reconfiguration: Asia, Europe, and North America remain dominant in GVC trade.
• Reshoring and Regionalization Trends: Major economies including China, the United States, and the European Union are actively reducing dependence on foreign value-added in domestic consumption.
  • This reshoring trend reflects shifting priorities toward supply chain security and reduced reliance on external sources.
• Electric Vehicle (EV) Value Chains: The rise of EV production is reshaping automotive supply chains. China accounted for a large share of global EV output as of 2023.
  • Critical minerals (e.g., lithium, cobalt) are central to EV supply, offering new opportunities for resource-rich developing economies, but also posing risks due to supply concentration.
• Technological Change & GVCs: Digitalization, automation, AI and advanced ICT are enabling finer fragmentation of production, lowering coordination costs and creating new resilient network structures.
  • Economies with strong absorptive capacity and infrastructure benefit most, while others risk being left behind.

Challenges for India in GVC Integration

• Infrastructure and Logistics: High logistics costs, port inefficiencies, and delays reduce competitiveness.
• Regulatory and Policy Uncertainty: Frequent policy changes and compliance burden discourage long-term investment.
• Limited Trade Agreements: India’s relatively fewer FTAs limit preferential access to major markets.
• Skill and Technology Gaps: Shortage of skilled labour in advanced manufacturing.
• Sustainability Barriers: Carbon border measures and ESG norms may raise compliance costs for Indian exporters.

Recommendations

• For Policymakers:
  • Promote digital and logistics infrastructure to broaden participation.
  • Align climate and trade policies to reinforce environmental and competitiveness objectives.
  • Strengthen trade finance access to close gaps for SMEs and developing economies.
  • Encourage transparent and coordinated industrial policies that support resilience without undermining global cooperation.
• For Firms: 
  • Invest in digital tools, AI and automation to enhance resilience and adaptability.
  • Diversify supply networks to balance efficiency with risk mitigation.
  • Leverage regional networks where strategic advantages exist.

Source: WTO