Integrating India with Asian Production Networks: Prospects and Challenges

The formation of regional production networks (RPNs) is one of the most important drivers of growth in East and Southeast Asia. In view of slowdown in growth and even recession in advanced economies as a result of the adverse impact of the global financial crisis of 2008 and the ongoing European debt crisis, RPNs need to reorient their production and exports toward rising middle class of Asia. To successfully implement the new initiative of “Make in India”, India needs to be integrated significantly with the RPN. The paper attempts to assess how far intra-industry trade in the form of production and service networks will grow and contribute to the rapid growth in China, India, and Southeast Asian countries, especially from India's perspective. It also examines the trends and patterns; and prospects of integration as well as the prospects for, and the challenges and risks of, significantly integrating India with the RPN. The paper focuses on electronics, automobiles and auto parts and components. The paper finds that in view of high competitiveness in providing outsourced information technology and R&D services in a wide range of industries, India has tremendous potential to integrate with RPN and become a key player like the PRC. India should improve technological capability, ease of doing business, infrastructure, and local support industries as well as EASE efficient governance and regulatory system, including full transparency in the application of the law.