Global value chain participation and economic upgrading in Indian textile and apparel sector: Evidence from firm-level productivity and profitability

Srija Mitra () and C Vidya ()
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Srija Mitra: Centre for Economic and Social Studies
C Vidya: Centre for Economic and Social Studies

Economics Bulletin, 2026, vol. 46, issue 3, 1109 - 1126

Abstract: This study examines the economic upgrading process among the Indian textile and apparel (T&A) firms by investigating the impact of Global Value Chain (GVC) integration on the productivity and profitability of these firms. To mitigate the selection bias and endogeneity issues, this study employs a two-stage empirical strategy, combining Propensity Score Matching and two-step system Generalized Methods of Moments. The empirical analysis is based on firm level data drawn from PROWESS database, encompassing 5,545 firms over the time period 2000-2019. This empirical analysis yields three major findings. First, GVC participation is concentrated among the firms that already exhibit higher productivity and profitability. Second, GVC participation enhances both productivity and profitability, confirming the occurrence of economic upgrading among T&A firms in India. Third, both forward and backward linkages contribute to productivity and profitability gains. Forward linkages generate immediate effects, while backward linkages exhibit a lagged impact.

Keywords: Global Value Chain; Economic Upgrading; Firm Productivity; Firm Profitability; Forward and Backward Linkages (search for similar items in EconPapers)
JEL-codes: F1 L2 (search for similar items in EconPapers)
Date: 2026-09-30
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