To enhance manufacturing exports, India, a major player in the services segment, has recently created an enabling environment through the launch of several programmes, for example, the ‘Make-in-India’ and the production-linked incentive (PLI) schemes. As the firm-level evidence on the synergies between services input use (i.e., servicification) and manufacturing exports in the country is relatively scarce, the current analysis studies the relationship between them by using the CMIE-Prowess dataset over a period of 2000–2019, for both new and existing exporting firms. At the firm level, the article uses a two-step system generalized method of moments (GMM) estimator for studying the impact on export intensity, while a dynamic panel probit model is used to study the impacts on the decision to export. Apart from the analysis at the aggregate level, the influence of servicification is also judged for the low-tech and mid-to-hi-tech sectors separately and the disaggregated industry level. The observed positive relationship between servicification and manufacturing exports implies that the integration of competitiveness in the field of services with hi-tech manufacturing sectors can enhance India’s exports on the one hand and deepen firm-level global value chains participation on the other hand.
AggarwalS., ChakrabortyD., & BhattacharyyaR. (2023). ‘Atmanirbhar Bharat Abhiyan’: Smooth drive to self-reliance? Economic and Political Weekly, 58(16), 40–47.
2.
AlessandriaG., & ChoiH. (2007). Do sunk costs of exporting matter for net export dynamics?The Quarterly Journal of Economics, 122(1), 289–336.
3.
AnandR., KochharM. K., & MishraM. S. (2015). Make in India: Which exports can drive the next wave of growth?International Monetary Fund.
4.
AntrasP. (2021). Conceptual aspects of global value chains. World Bank Economic Review, 34(3), 551–574.
5.
ArellanoM., & BoverO. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68(1), 29–51
6.
ArnoldJ., JavorcikB., LipscombM., & MattooA. (2015). Services reform and manufacturing performance: Evidence from India. The Economic Journal, 126, 1–39.
7.
AthukoralaP. C., & VeeramaniC. (2019). From import substitution to integration into global production networks: The case of the Indian automobile industry. Asian Development Review, 36(2), 72–99.
8.
BaldwinR., ItoT., & SatoH. (2014). Portrait of factory Asia: Production network in Asia and its implication for growth; the ’smile curve’. Institute of Developing Economies.
9.
BaldwinR. (2017). The great convergence: Information technology and the new globalization. Harvard University Press.
10.
BangaR. (2018). Is India digitally prepared for international trade?Discussion Paper No. 235. Research and Information System for Developing Countries.
11.
BangaR., & GoldarB. (2007). Contribution of services to output growth and productivity in Indian manufacturing: Pre-and post-reforms. Economic and Political Weekly, 42(26), 2769–2777.
12.
BasM. (2014). Does services liberalization affect manufacturing firms’ export performance? Evidence from India. Journal of Comparative Economics, 42(3), 569–589.
13.
BernardA. B., EatonJ., JensenJ. B., & KortumS. (2003). Plants and productivity in international trade. American Economic Review, 93(4), 1268–1290.
14.
BlázquezL., Díaz-MoraC., & González-DíazB. (2023). Slowbalisation or a ‘new’ type of GVC participation? The role of digital services. Journal of Industrial and Business Economics, 50(1), 121–147.
15.
ChakrabartyS., & ChandaR. (2019). Services contribution to manufacturing exports and value-added: Evidence from India and China. Research Paper No. 602. Indian Institute of Management, Bangalore.
16.
ChaudhuriS (2015). Import liberalisation and premature deindustrialisation in India. Economic & Political Weekly, 50(43), 60–69.
17.
ChawlaI., & KumarN. (2023). FDI, international trade and global value chains (GVCs): India’s GVC participation, position and value capture. Asia and the Global Economy, 3(2), 1–32.
DasD. K., & GuptaN. (2019). Climbing up India’s manufacturing export ladder: How competitive are intermediate goods?Working Paper No. 371. Indian Council for Research on International Economic Relations, New Delhi.
20.
DeP. (2023). Strengthening regional integration in South Asia: A strategy paper on regional connectivity and trade facilitation. Discussion Paper No. 288. Research and Information System for Developing Countries, New Delhi.
21.
DashA., & ChandaR. (2017). Indian firms in electronics global value chains: Sectoral analysis. Centre for WTO Studies Working Paper No. 41. Indian Institute of Foreign Trade, New Delhi.
22.
Díaz-MoraC., García-LópezE., & González-DíazB. (2022). Bilateral servicification in global value chains and deep trade agreements. The World Economy, 45(8), 2510–2531.
23.
DuaP., & TutejaD. (2015). Global recession and eurozone debt crisis: Impact on exports of China and India. Working Paper No. 242. Centre for Development Economics, New Delhi.
24.
EconomouF., HassapisC., PhilippasN., & TsionasM. (2017). Foreign direct investment determinants in OECD and developing countries. Review of Development Economics, 21(3), 527–542.
25.
FayazM., & BhatiaS. K. (2018). Technological intensity of Indian exports and the performance of emerging Asian economies. Emerging Economy Studies, 4(1), 62–77.
26.
FrancoisJ., & HoekmanB. (2010). Services trade and policy. Journal of Economic Literature, 48(3), 642–692.
27.
FrancoisJ., ManchinM., & TombergerP. (2015). Services linkages and the value-added content of trade. The World Economy, 38(11), 1631–1649.
28.
GanvirM., & DwivediN. (2017). Internationalization and performance of Indian born globals: Moderating role of presence of foreign equity. International Journal of Emerging Markets, 12(1),108–124.
29.
GautamV. (2017). Exports and E-commerce in India. Occasional Paper No. 125. Observer Research Foundation, New Delhi.
30.
GhaniE., GoswamiG. A., & KharasH. (2012). Service with a smile. Economic Premise No. 96. World Bank.
31.
GoldarB. (2020). Services input and productivity in Indian manufacturing plants. Indian Growth and Development Review, 13(1), 99–124.
32.
GoldarB., BangaR., & BangaK. (2017). India’s linkages into global value chains: The role of imported services. India Policy Forum, 8, 107–164.
33.
GoldarB., ChawlaI., & BeheraS. R. (2020). Trade liberalization and productivity of Indian manufacturing firms. Indian Growth and Development Review, 13(1), 73–98.
34.
GoldarB., & MukherjeeS. (2016). Export orientation, import competition and plant survival in Indian manufacturing. Journal of International Trade, 1, 72–90.
35.
Government of India. (Undated a). PIB Press Release dated September24, 2014. https://pib.gov.in/newsite/printrelease.aspx?relid=109953
GoI. (Undated c). Department of Commerce website accessed on 17. 01 .2024. https://commerce.gov.in/trade-statistics/
38.
GoI. (Undated d). ‘Wholesale Price Index (WPI)’, Department for Promotion of Industry and Internal Trade. Office of Economic Advisor. https://eaindustry.nic.in/
39.
GuptaN., KumarP., & SainiR. (2021). India’s electronics industry: Potential for domestic manufacturing and exports. Research Report. New Delhi: Indian Council for Research on International Economic Relations.
40.
HaidarJ. I. (2012). Trade and productivity: Self-selection or learning-by-exporting in India. Economic Modelling, 29 (5), 1766–1773.
41.
HelbleM., & ShepherdB. (eds.). (2019). Leveraging services for development: Prospects and policies. Asian Development Bank Institute.
42.
HoekmanB., & ShepherdB. (2017). Services productivity, trade policy and manufacturing exports. The World Economy, 40, 499–516.
IyerC. G. (2024). Process innovation in low-tech industries in India: An empirical exploration. African Journal of Science, Technology, Innovation and Development, 16(1), 140–151.
45.
JonesR. W., & KierzkowskiH. (1990). The role of services in production and international trade: a theoretical framework. In:JonesR. & KruegerA.(Eds.), The political economy of international trade: Essays in honor of Robert E. Baldwin (pp. 31–48). Basil Blackwell.
46.
JonesR. W., & KierzkowskiH. (2005). International trade and agglomeration: An alternative framework. Journal of Economics, 10, 1–16.
47.
KathuriaS. (Ed.). (2018). A glass half full: The promise of regional trade in South Asia. World Bank.
48.
KelleM. (2013). Crossing industry borders: German manufacturers as services exporters. The World Economy, 36(12), 1494–1515.
49.
KumarN., & SiddharthanN. S. (1994). Technology, firm size and export behaviour in developing countries: The case of Indian enterprises. The Journal of Development Studies, 31(2), 289–309.
50.
LevinsohnJ., & PetrinA. (2003). Estimating production functions using inputs to control for unobservables. The Review of Economic Studies, 70(2), 317–341.
51.
LowP. (2013). The role of services in global value chains. InElmsD. K. & LowP.(Eds.), Global value chains in a changing world (pp. 61–81). World Trade Organization.
52.
ManghnaniR., MeyerB., SaezS., & van Der MarelE. (2021). Firm performance, participation in global value chains and service inputs: Evidence from India. Policy Research Working Paper No. 9814. World Bank.
53.
MaitiD., CastellacciF., & MelchiorA. (2020). Digitalisation and development: Issues for India and beyond. InMaitiD., CastellacciF., & MelchiorA.(Eds.), Digitalisation and development: Issues for India and beyond (pp. 3–29). Springer.
54.
MelitzM. J. (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 71(6), 1695–1725.
55.
Mercer-BlackmanV., & AblazaC. (2018). The servicification of manufacturing in Asia: Redefining the sources of labor productivity. ADBI Working Paper Series No. 902. Asian Development Bank Institute, Tokyo.
56.
MiroudotS., LanzR., & RagoussisA. (2009). Trade in intermediate goods and services. OECD Trade Policy Working Paper No. 93. Organisation for Economic Co-operation and Development.
57.
MiroudotS., & &CadestinC. (2017). Services in global value chains: From inputs to value-creating activities. OECD Trade Policy Paper No. 197. Organisation for Economic Co-operation and Development.
58.
MohapatraS. M. (2022). Export performance of micro, small, medium and large enterprises of Indian manufacturing sector. Journal of Public Affairs, 22(2), e2480.
59.
MukherjeeS. (2015). The role of services in enhancing Indian manufacturing exports: A firm level analysis, 200001 to 2011–12. Journal of Economics Library, 2(4), 334–349.
60.
MukherjeeS. (2018). Services outsourcing and productivity growth: Evidence from Indian manufacturing firms. South Asia Economic Journal, 19(2), 192–209.
61.
MukherjeeS., & ChandaR. (2021). Financing constraints and exports: Evidence from manufacturing firms in India. Empirical Economics, 61(1), 309–337.
62.
NagB. (2016). Emerging production network between India and ASEAN: An analysis of value-added trade in select industries. InChakrabortyD. & MukherjeeJ.(Eds.), Trade, investment and economic development in Asia (pp. 41–67). Routledge.
63.
NagarajP. (2014). Financial constraints and export participation in India. International Economics, 140, 19–35.
64.
NayakS., AggarwalV., & MannP. (2013). India’s manufacturing export dynamics: An analysis of technology intensity transition. Centre for WTO Studies Working Paper No. CWS/WP/200/6. Indian Institute of Foreign Trade.
65.
Organisation for Economic Co-operation and Development. (2023). Trade in value added (TiVA) database. https://stats.oecd.org/Index.aspx?DataSetCode=TIVA_2023_C1
66.
PadmajaM., & SasidharanS. (2017). Sunk costs, firm heterogeneity, export market entry and exit: Evidence from India. Journal of Quantitative Economics, 15, 367–393.
67.
PantS., & ChakrabortyD. (2023). Is there a relationship between servicification and manufacturing Productivity? Empirical evidence from Indian firm-level data. Empirical Economic Letters, 22(3), 39–51.
68.
PattnayakS. S., & ChadhaA. (2022). Servicification and manufacturing exports: Evidence from India. Economic Modelling, 108, 105756.
RBI. (2024). Press Release dated May 2, 2024. https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=57828
71.
ReddyK., SasidharanS., & ThangaveluS. (2023). Does servicification of manufacturing increase the GVC activities of firms? Case of India. The World Economy, 46(1), 153–181.
72.
RoodmanD. (2009). How to do xtabond2: An introduction to difference and system GMM in Stata. Stata Journal, 9(1), 86–136.
73.
SeenaiahK. (2023). R&D behaviour of Indian firms: A case of high-tech manufacturing. Working Paper No. 266. Institute for Studies in Industrial Development.
74.
SharmaC. (2018). Productivity and size of firms: Evidence from Indian manufacturing. Economics Bulletin, 38(2), 791–798.
75.
SinghD. A. (2009). Export performance of emerging market firms. International Business Review, 18(4), 321–330.
76.
SinghalN. (2021). An empirical investigation of Industry 4.0 preparedness in India. Vision, 25(3), 300–311.
77.
TaguchiH. (2021). Participations in global value chains and service-link costs in emerging ASEAN economies. MPRA Paper No. 105268. Munich Personal ReREc Archive.
78.
TakkarI., & SharmaS. (2021). Impact of e-commerce on India’s exports and investment. International Journal of Economics and Business Research, 21(2), 206–222.
79.
ThomasR., & NarayananK. (2016). Productivity heterogeneity and export market participation: A study of Indian manufacturing firms. InDe BeuleFilip & NarayananK.(Eds.), Globalization of Indian industries: Productivity, exports and investment (pp. 97–120). Springer.
80.
VandermerweS., & RadaJ. (1988). Servitization of business: Adding value by adding services. European Management Journal, 6(4), 314–324.
81.
VeeramaniC., & DhirG. (2022). Do developing countries gain by participating in global value chains? Evidence from India. Review of World Economics, 158 (4), 1011–1042.
82.
WiesnerS., FreitagM., WestphalI., & ThobenK. (2015). Interactions between service and product lifecycle management. Procedia CIRP, 30, 36–41.
83.
World Bank. (2021). Shifting gears: Digitization and services-led development. World Bank.
84.
WTO. (2024). Global trade outlook. www.wto.org/english/res_e/booksp_e/trade_outlook24_e.pdf
