India in Global Services Value Chain: The Case of IT-BPM

This paper examines the development of the services sector in India in terms of the global value chain (GVC) framework. In particular, it looks at the information technology and business process management (IT-BPM) services and finds that firm characteristics such as size, age and foreign ownership are important determinants of GVC participation for IT firms. Furthermore, the study demonstrates that investment in computer and IT systems promotes forward and backward linkages by the companies. Likewise, while royalty payments for foreign technology prove to be an important factor for backward participation, that is not the case for forward participation. It is also shown that R&D expenditure does not have a positive impact on GVC participation, which suggests that Indian IT firms are currently engaged in low-end activities of the value chain, carrying out mundane tasks like coding and body-shopping. In order to upgrade to greater value-added activities, investment in new technologies and products is crucial.