A Global Value Chain covers every step — design, raw materials, components, assembly, marketing, and after-sales — spread across multiple countries. Firms join GVCs to exploit comparative advantage at each stage rather than producing entirely at home. The World Bank estimates over 70 percent of global trade now flows through GVCs. India's participation, especially in electronics and pharmaceuticals, is a key policy focus, with PLI schemes aiming to deepen domestic value addition within these cross-border production networks.

A Global Value Chain (GVC) is the full sequence of activities that transforms an idea into a finished product in the hands of a consumer — and crucially, these activities are distributed across different countries rather than performed under one roof.

**Why GVCs matter conceptually:**
Traditional trade theory assumed countries export finished goods. GVCs shattered this: a smartphone may be designed in the US, use chips from Taiwan, screens from South Korea, and be assembled in China or India. Each country captures value at only one link of the chain.

**Types of GVC governance (Gereffi's framework):**
1. **Producer-driven chains** — capital-intensive industries like automobiles where lead firms (MNCs) control upstream production.
2. **Buyer-driven chains** — labour-intensive industries like garments where large retailers and brand-name companies control design and marketing but outsource manufacturing.

**Key components:** R&D and design → raw material sourcing → component manufacturing → final assembly → marketing and distribution → after-sales services.

**India's GVC position:** India participates mainly as a 'limited value-added' node — strong in IT services, generic pharmaceuticals, and textiles, but weak in high-value manufacturing assembly. Production-Linked Incentive (PLI) schemes target upgrading India's position in electronics, semiconductors, and specialty chemicals.

**Limitations of GVCs:** Concentration risk (COVID-19 disruptions), race-to-the-bottom on labour and environment standards, unequal distribution of value (lead firms capture most profit), and vulnerability to geopolitical shocks like US-China trade tensions that trigger 'friend-shoring' and 'near-shoring' trends.