Logistically speaking

India’s logistics push is well timed, comes as it does at a time of global supply chain disruptions and signs of realignment in export markets. There are perhaps three broad aspects to logistics development: brick and mortar infrastructure in the form of ports, road, rail, warehouses and their seamless connectivity with each other; trade facilitation in the form of processes at the customs; and a regulatory system that helps track consignments in real time and ensures participation by all stakeholders. India’s MSME-dominated exports have suffered a competitive disadvantage on account of inefficient logistics. Even if the average turnaround time of container vessels has fallen from 44 hours to 26 hours in recent years, India’s logistics cost at 13-14 per cent of GDP is much higher than global standards of 10 per cent or less. The National Logistics Policy (NLP) has been unveiled in this context. It seeks to complement the PM Gati Shakti Plan announced last October to raise India’s logistics systems to global standards. While the latter entails improving port and rail infrastructure, at an investment of ₹100 lakh crore over the next few years, the NLP primarily aims at creating an overarching digital framework to ensure that systems can be regulated and tracked. The creation of a ‘Unified Logistics Interface Platform’ with UPI-like characteristics is expected to help MSMEs in particular. The other salient feature is the E-LogS dashboard for documentation and processes, which too is expected to facilitate ease of doing business for entities which waste a great deal of time dealing with formalities. This is expected to benefit textiles and gems and jewellery exporters in particular. Superior logistics will also help offset higher tariffs.

The push to logistics has also become inevitable in the context of the WTO Trade Facilitation Agreement that came into effect five years ago; it enjoins countries to improve their processes and procedures to meet certain global standards, with concessions to the developing countries in making the transition. These improvements need to be credibly mapped and measured for the benefit of global stakeholders. With the World Bank’s Doing Business reports having been discontinued, India needs to create its own metrics. Ongoing efforts to rank the logistics of States across a set of parameters should be continued with due rigour. According to Economic Survey 2016-17, India’s logistics cost in terms of per km of road transport was $7, against $2.4-2.5 in the case of China, $3.9 in Bangladesh. This has presumably improved, as the Economic Survey 2021-22, citing a UNESCAP study, suggests.

India has improved its systems in cross-border paperless trade, institutional arrangement and cooperation, formalities and transparency. Capex in rail networks, as is being pursued at present, will address the freight mismatch in favour of road. This will aid efficiencies, in energy and operational terms. However, the challenge is to generate funds for long-term investments across sectors. As the report of the task force on National Infrastructure Pipeline observes, DFIs have a pivotal role to play here by way of long-term financing. Infra financing will have to be undertaken through a range of PPP options, keeping in mind the rising cost of debt. The road ahead is clear enough.

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