How competitive is India when it comes to logistics?

In 2018, India was ranked 44th in the World Bank Logistics Performance Index, a measure through which the Bank ranks countries based on their logistics performance. India currently records relatively higher logistics costs at 13-14 per cent of the GDP while it is 8-10 per cent for most of the mature economies. The sector is highly fragmented and unorganised.

The regulatory environment is complex due to multiple regulations governed by various stakeholders. For example, there are over 20 government agencies; 37 export promotion councils; 500 certifications; 200 shipping agencies; 36 logistics services; 129 Inland Container Depots and 168 Container Freight Stations. The logistics sector is also heavily dependent on road transport. There is also a low level of technology adoption among various stakeholders. The high indirect costs due to unpredictable supply chains and poor first and last mile connectivity add to the logistics cost.

What has been Modi Government’s strategy to reduce logistics costs?

Since 2014, when the Modi government came to power, there has been much emphasis on improving logistics, through initiatives like Sagarmala for shipping, Bharatmala for road and UDAN for aviation. In October 2021, PM Gati Shakti was launched as a National Master Plan for multi-modal connectivity to bring together 16 ministries, including railways and roadways, for integrated planning and coordinated implementation of infrastructure connectivity projects.

What is the objective of the National Logistics Policy?

The PM Gati Shakti scheme envisages efficiency in services like processes, digital systems and regulatory framework. The National Logistics Policy, launched by Prime Minister Narendra Modi on September 17, is the logical next step to provide a comprehensive agenda to develop the entire logistics ecosystem with two major visions.

The first is to reduce logistics cost in India by 5 per cent of GDP over the next five years. The second is to improve India’s ranking in the Logistics Performance Index. It also aims to enhance logistics sector competitiveness through a unified policy environment and an integrated institutional mechanism.

The policy seeks to pave the way for India to become a logistics hub by providing seamlessly integrated multiple modes of transportation by leveraging technology, processes and skilled manpower.

How has the policy been received by the stakeholders?

The response has been positive from stakeholders. For the first time, the $200 billion logistics sector has been given the attention it deserves. The policy is an example of inter-ministerial collaboration and will help in integrating the supply chain.

The Unified Logistics Interface Platform will enhance visibility for customers and enable logistics companies to adopt digitisation on a much larger scale. More importantly, the policy will spur investment across the logistics sector. The stakeholders feel there has to be alignment of the policy across all States to be effective. The trade is confident that an empowering provision will follow soon for effective implementation of the policy at ‘cheetah’ speed.

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