Advantages And Disadvantages Of Ipns

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IPNs or international production networks is a concept whereby different stages of value chain spread across borders/countries, but the final complete product will be assembled in one country and sell to consumer. This country will need to import all the necessary raw materials or intermediate good from other countries in order to develop the finished good. In other words, it is the segmentation of production processes in both goods and services and the scatter of the segments over an international network. By doing so, it will be able to reduce production cost by taking the advantage of each country comparative advantage (able to produce certain good with lower opportunity cost) and specialization as different countries have different factor…show more content…
Firstly, the need for continued unilateral trade and investment liberalization with emphasis on regulatory reforms, much of inward FDI in India’s manufacturing sectors has been viewed as more of “market-seeking” rather than “efficiency-seeking” FDI that will help to link India with Asian IPNs. While the Indian economy becomes outward-oriented, the perception among trading partners of India as a preferred trade and investment partner needs to improve. It needs to deal with behind-the border restrictions on international trade and investment. Secondly, reducing transaction costs, and improving physical and institutional infrastructure for cross-border trade and investment. The high trade cost is due to export related documentation and high logistics cost from low quality infrastructures involving inefficient ports, complicated bureaucratic procedures and electricity outage. This creates unfavorable business environment. Upgrading of transportation infrastructure (road, railway, etc.) and communications technology services are needed to allow efficiency and reduction in cost. Third, addressing labor market rigidities, since manufacturing sector can provide large-scale employment, and be a key driver for structural change as India grows, it would help India integrate into Asian IPNs because it promotes growth through forward and backward linkages with other sectors, particularly the services sector which has contributed greatly to country’s growth. However, when there are rigidities, India is not able to shift its employment structure towards manufacturing even with its many low-cost skilled labors. Hence, it fails to make use of its human resources efficiently to compete in the international markets. Other than that, labor market rigidities cause “jobless growth” in organized manufacturing and thus the increasing use of contract and temporary workers. Therefore, there is a need for labor reform at national and state

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