Logistics cost in India was 7.8 per cent to 8.9 per cent of GDP in 2021-22, as per secondary data-based estimates made by the think-tank National Council of Applied Economic Research (NCAER). The estimate was part of a report on the assessment of logistics costs in India by the Department for Promotion of Industry and Internal Trade (DPIIT).

Going forward, the framework developed for estimating logistics cost will be refined further by including data collected through primary surveys and also incorporating real-time big data such as E-way bill data and FASTag data (for estimating time cost), as recommended by the report.

Important milestone

“This is an important milestone in developing credible and reliable data on logistics cost in India. It is creating a framework which we will be able to use in the future to make credible logistics cost estimates for the country to ensure and to reassure both domestic and foreign investors regarding the improvements in logistics cost efficiency,” DPIIT Secretary Rajesh Kumar said releasing the report on logistics cost in India on Thursday.

The NCAER report presents a baseline aggregated logistics cost estimate and a framework for long-term logistics cost calculation. It uses available secondary data from the Supply Use Tables and National Account Statistics of Ministry of Statistics and Programme Implementation (MoSPI) and the NCAER’s 2019 study.

The Secretary pointed out that the government had released a National Logistics Policy which was aimed at cutting down logistics cost to below 10 per cent (of GDP) and improve India’s ranking in the World Bank’s Logistics Performance Index (LPI) from 38th at present to below 25.

“The improvement that you see in our roads, ports and other infrastructure will get captured (in the new framework). And this initiative will ensure that we can point out to the global ranking agencies, including World Bank, how much we have improved in the area,” Singh said.

The current available non-official estimates of logistics costs, which is 8-14 per cent of GDP, lacks a conclusive and scientific calculation framework.

Scientific framework

To align India’s logistics costs with global benchmarks by 2030, a need was felt to develop a scientific logistics cost calculation framework, which is inclusive and stands the test of various statistical and data-based methods and then collect the data (primary and secondary) for analysis.

The DPIIT constituted a task force which adopted a consultative approach for calculating logistics cost in India through scientific means and members included representatives from ADB, NCAER, Ministry of Statistics and Programme Implementation (MoSPI), academia and logistics industry stakeholders.

NCAER worked on its report on assessment and long term framework for logistics cost in India based on the consultations.

ADB, which partnered the DPIIT in the workshop on logistics costs, which subsequently led to the setting up of the task force, has supported logistics division and NCAER by bringing in its best practices on logistics costs, both public and private sector, pointed out ADB Deputy Country Director Hoe Yun Jeong.

“We are pleased with the release of the report reflecting this effort….As we understand our work here is not yet done. The report highlights the need for a more detailed survey-based study that looks at the experience of firms and logistics providers. This task will include a hybrid approach to integrate primary and secondary surveys,” he said. 

ADB wants to continue collaborating with DPIIT.  “We will give all support for its long term cost assessment,” he said. 

To ensure evidence-based decision making for improving logistics efficiency, logistics costs should be estimated on a regular basis (preferably annually), the report noted. This requires institutionalising the process of data collection in a systematic and periodic manner, for which an MoU with NCAER is planned.

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