High indirect costs of trade due to delays and unreliable transportation services account for as much as 38-47% of total transportation and logistics costs, severely undermining the country’s export competitiveness, according to a CII-Maersk study, reports fe Bureau in New Delhi. This gets reflected in the fact that for each container transported to and from India, there is a high variation in lead times of anywhere between 38 and 66 hours.
So while India’s transport and logistics costs are at 14.4% of its GDP, China’s stand at just 8%. The indirect costs of trade include various losses caused by spoilage, increase in freight costs as well as penalty due to delay, inventory and storage costs.
Based on a case study on four sectors (pharma, textiles and garments, electronics, and auto components), the report says trimming the indirect costs by 10% could potentially generate additional annual exports up to $0.9 billion in pharma, $3.1 billion in textiles, $1.2 billion in electronics and $0.3 billion in auto components.
India has jumped 16 places in the World Bank’s Logistics Performance Index this year from a year ago to rank 35th.
Since many manufacturing centres are far away from ports, the transportation and other expenses drive up India’s cost to export, compared with other Asian peers. According to a World Bank report, India’s cost to export stood at a massive $1,332 per container, compared with $572 in Indonesia or $525 in Malaysia.