India-European Union global value chain integration: An economywide analysis

Abstract

The COVID-19 pandemic has significantly impacted global businesses with operations or suppliers in China. Against such a backdrop, this paper analyses the opportunity of India as the counterpart to China to establish and control global value chains (GVCs) in the pandemic of COVID-19 using a global trade analysis project framework. We begin by identifying sectors that are becoming more and more integrated into EU global value chains and have been negatively impacted by Chinese company closures. Of all the affected industries, we concentrate on those sectors in which India enjoys a comparative advantage over China and examine the effects of an EU-India free trade agreement on these sectors as well as India's overall macroeconomic indices. The study reveals that both India and the European Union stand to benefit from a free trade agreement. However, despite the gains, India’s trade balance is also expected to reduce due to increased imports as a result of reduction in the import duty.