The National Logistics Policy (NLP) unveiled by Prime Minister Narendra Modi is a major structurally transformative initiative which will substantially reduce transaction costs across the entire supply chain. It will facilitate India in being embedded across global value chains as we move ahead on the path towards Bharat@100.
Enabled by different technologies, the NLP focuses on unified measures across different logistics modes, including roads, rail, ports, airports and warehousing that will give a decisive edge to Ease of Doing Business in India (EoDB).
Backbone of the economy
Logistics is considered to be the backbone of an economy, which makes up for 14.4 per cent of the country’s Gross Domestic Product (GDP) and impacts all industries, especially agriculture, manufacturing and services. It also provides employment to more than 22 million people. Everyone across the country and the world felt the magnitude of the impact of this sector during the pandemic.
Ironically, it is also a highly unorganised sector, with 80 per cent of its industries found to be small or medium-sized companies, that the government is trying to rein in and has been taking several measures to improve and regularise. Last year, it introduced the PM Gati Shakti-National Master Plan (PMGS-NMP) to achieve economic transformation and logistics efficiency through seamless multi-modal connectivity, which includes transportation by road, rail, sea and air.
It also facilitates speedier adoption and implementation of digitalisation. The NLP will leverage this work being done under PMGS-NMP to streamline the sector and enhance efficiencies.
Currently, the logistics cost of India stands at 14 per cent of GDP vis-à-vis 8-11 per cent of mature economies like the US, Germany and Japan. Cutting down logistics costs will not only increase the country’s exports but also solve the issue of investments across sectors.
Integrating local supply chains with global value chains will garner further interest and private investments from international players to select India as a key sourcing market. The boost to foreign trade, especially the country’s exports, will have a ripple effect on private investments.
The NLP helps domestic companies capitalise on not just hard assets through transportation but also soft assets that entail digitisation and documentation. Companies that have already taken to the multi-modal connectivity are benefitting from it. The other attraction is digitisation through ULIP (United Logistics Interface Platform), which brings all modes of transport on one a single platform in terms of visibility to customers.
Scope for new gateways
The policy’s single-window logistics e-market not only unites the sector digitally but will help to eliminate choke points and enhance connectivity across the country, especially in the north-east. This will be made possible with the interlinking of all four modes of transportation to deliver goods and services. It will also help to identify and develop new gateways with ports, some of which have not been used in the past five years. Opening these gateways is necessary to loosen up the bottlenecks, reduce inventory costs, and ensure quick service delivery.
Since logistics measures and policies are largely centred on multi-modal connectivity, the policy is also expected to correct the mix, which has roads accounting for 60 per cent of the total transport, followed by railways at 30 per cent and waterways at around 5 per cent. There is a need to balance the mix and correct it. Shifting the transport concentration from roads to railways and waterways will reduce costs in the logistics sector, power the country’s economic growth, and help it achieve its environmental, social and governance (ESG) goals.
With so much going for NLP, the country is headed in the right direction armed with this policy and seems poised to achieve its many goals — be it as a $5-trillion economy or its net-zero emission status.
The writer is the Secretary General of ASSOCHAM