Key Details
The OECD Policy Brief Seeing the Capital Behind Trade: Unveiling Hidden Interdependencies finds that conventional Trade in Value Added (TiVA) measures underestimate global production links by excluding capital such as machinery, software, databases and R&D. The OECD’s new indicators add the productive assets behind exports to the intermediate goods and services already captured in conventional trade statistics.
Measure | Conventional Estimate | With Capital Included |
|---|---|---|
India’s global value-chain participation | 43.5% | 53.1% |
OECD-average participation | 51.5% | 62.9% |
Services content of OECD manufacturing exports | About 33% | 41.7% |
India’s measured participation increases by 9.6 percentage points.
The OECD-average increase is 11.4 percentage points.
The underlying dataset covers 60 economies and 40 industries from 2000 to 2022.
Capital includes machinery, equipment, buildings, infrastructure, software, databases, R&D and other intellectual-property assets.
The services-content result is an OECD average; the brief does not publish a corresponding India-specific figure.
Trade Statistics Miss the Assets Used to Make Exports
Conventional Trade in Value Added, or TiVA, indicators trace goods and services consumed during production. They can show, for example, that an Indian manufacturer uses imported components or foreign logistics services.
Machinery, software and other assets used over several years are treated differently. If an Indian factory exports goods made with a foreign robot, conventional TiVA generally records the robot’s contribution as part of domestic production. The country and industry that created the robot are no longer visible in the production chain.
The OECD’s capital-augmented TiVA framework traces the value contributed by these physical and intangible assets across countries and production stages. It complements conventional indicators rather than replacing them.
India’s Measured Participation Rises by Nearly 10 Percentage Points
India’s global value-chain participation increases from 43.5% to 53.1% of gross exports when capital is included.
The measure combines two types of connection:
Foreign capital behind Indian exports: machinery, software and other assets produced abroad and used in India’s export production.
Indian capital supporting other countries’ exports: capital-related value created in India and subsequently used in production elsewhere.
The result shows that India’s export economy has deeper international production links than conventional statistics reveal. It represents a change in measurement, not an increase in India’s participation between two years.
Manufacturing Exports Contain More Services Than Recorded
Adding intangible capital raises the measured services content of OECD manufacturing exports by around 9 percentage points on average. The increase reflects software, R&D, databases and intellectual property that support the production of goods without necessarily appearing as current service inputs.
This places services inside the manufacturing story. Export competitiveness depends not only on factories, components and labour, but also on engineering, digital systems, design and research capabilities.
The OECD does not provide the equivalent increase for India in this brief. The global finding nevertheless demonstrates why manufacturing and services cannot be assessed as separate production systems.
Capital Exposure Adds Another Layer to Supply-Chain Analysis
The new indicators also measure the foreign capital supporting manufacturing output. India has both import-side exposure, where its manufacturing uses capital sourced abroad, and export-side exposure, where Indian capital-related value supports production in partner economies.
In the OECD chart, other OECD economies account for the largest component of India’s import-side capital exposure. China and other non-OECD economies also contribute.
Foreign exposure is an indicator of interdependence rather than proof of vulnerability. A policy concern emerges when an important asset is supplied by a small number of firms or countries, has few technical substitutes and would be costly or time-consuming to replace.
Policy Relevance
The new measurement changes two questions facing Indian policymakers.
How much domestic capability has industrial policy created? Manufacturing output or local assembly can rise while production remains reliant on imported machinery, design software, databases or intellectual property. Capital-origin indicators could provide a fuller assessment of domestic value addition under manufacturing incentives and sectoral missions.
Which external links require resilience measures? Capital exposure can identify industries that depend heavily on foreign productive assets. Decisions on diversification or domestic capability-building should then consider supplier concentration, technical substitutability, switching costs and the economic consequences of disruption.
Applying this approach in India will require better information on asset origin, intangible investment, depreciation and the industries using each asset. Linking those statistics with firm- and product-level data would allow more precise sectoral analysis.
Follow the Full Policy Brief Here: Seeing the Capital Behind Trade: Unveiling Hidden Interdependencies