much larger volume, as is evidenced by the value of their gross exports. The manufacturing exports of China are almost nine times India’s exports while those of the United States are over four times India’s exports. The right panel of the Figure 1 breaks down the participation index into forward and backward participation. The forward participation of India in manufacturing GVCs is lower than all comparator countries with the exception of Mexico (right panel of Figure 1). Manufacturing inputs from India are not used much by countries in their production processes and exports.

The GVC participation of India in services is lower than that of Korea, Malaysia, the United Kingdom, and Germany (left panel of Figure 2). While this may seem surprising at first, given the importance of services exports in India’s exports basket, the decomposition of GVC participation into forward and backward participation sheds some light on this (right panel of Figure 2).<sup>1</sup> The high GVC participation in services of countries such as Korea and Malaysia is explained by their relatively high backward participation, i.e., the use of imported inputs in their service exports. On the other hand, the forward GVC participation in India is higher than most comparator countries with the exception of the United Kingdom, the United States and Germany. This relatively high forward participation in services GVCs is because of the use of Indian services including IT and back office services in exports of third countries. Figure 3 depicts the GVC participation (backward and forward) of the IT and information services industry. India’s specialization in these IT and information services explains to some extent India’s relatively higher forward linkages.

Figure 1: Manufacturing GVC participation, Gross Exports and Manufacturing GVC participation by Type <!-- Start of picture text --> GVC participation and gross exports MANUFACTURING<br>Manufacturing<br>SVK<br>HUN SGP<br>CZE 0.5<br>MLT LUX BGR MYSTWN 0.4<br>EST HKG VNMBEL<br>LTUSVN NLD MEX<br>AUTPOLTHA KOR 0.4<br>KHM GRCNORPRTPHL<br>TUNMARCHL ROUZAFFIN ESPCAN FRA 0.3<br>LVA PER SAU SWE IRLCHE ITAROW DEU 0.3 0.3<br>CYP ISL HRV COL ISRDNKAUS IDN RUS INDGBR 0.2<br>CRI KAZ TUR JPN CHN 0.1 0.2 0.2 0.1 0.1 0.2 0.2 0.2 0.2<br>BRA USA 0.1<br>0.1<br>NZL<br>ARG MEX MYS KOR IND DEU GBR CHN BRA USA<br>Backward Forward<br>6 8 10 12 14<br>Gross exports log (2015)<br>.7<br>.6<br>.5<br>.4<br>.3<br>.2<br>.5<br>.4<br>.3<br>.2<br>.1<br>0<br><!-- End of picture text --> Source: OECD; own calculations

> 1 Business services, particularly IT and other information exports constitute a large share of India’s export basket (Annex **Error! Reference source not found.** ). Business services includes distribution, transport, accommodation, IT-related services, financial services, real estate and other business services such as administration services. Over 40 percent of India’s total gross exports takes place in business services, with IT and other information services accounting for the bulk of the exports. The share of business service exports in total exports is around 46 percent when measured in value-added terms. The IT and information services sector constitute around 22 percent of India’s value-added exports. Value-added shares of business services exports are higher than observed in gross exports of services, which is in line with worldwide patterns of value-added trade. This is because services are an important input provider used by downstream industries. Services are often domestically produced and then exported indirectly into other goods (or services) at the final stages of the value chain or exported as a final good.

4