The attempt by a committee chaired by the minister of state for commerce and industry, Jyotiraditya Scindia, to map out a plan of action for reducing the transaction time and costs for exporters by 7-10% is laudable, given the uncertain trends in global trade and the need to boost profitability in the face of an appreciating rupee. Such an effort will not only help boost export profit margins but also the volume of exports. Delays in transactions not only add to costs but also have a disproportionately large negative impact on exports of time-sensitive industries, like fresh food and perishables, which is very important for countries like India where agriculture plays a significant role in generating income and employment. India?s record on the trade facilitation front has been tardy despite the large gains in trade made in recent years.
In fact, the most recent effort made by the World Bank to compare the trade logistics in the global economy shows India in a bad light with the country?s logistic performance ranking slipping from the 39th position in 2007 to the 47th in 2010. This is in sharp contrast to other Asian economies that have improved their performance. For instance, while China?s ranking has gone up from 30th to the 27th, that of the Philippines has improved from 65 to 44. India?s ranking on the six important parameters used to rank the overall logistics performance differed substantially with the ranking varying in the 40-56 range. India?s highest ranking was in the logistic quality and competence (40) followed by access to international shipments (46), infrastructure facilities (47), customs procedures (52), tracking and tracing facilities (52), and timeliness (56). The survey showed that the number of agencies to be handled by an Indian exporter averaged 3.71, while a German exporter had to tackle just 2.25. Similarly, while an Indian exporter had to provide five different documents for an export transaction, the German exporter could do with three. The clearance time for physical inspection averaged 3.5 days in India, while it was only 1.6 in Germany. So, while it took an average of 4.8 days and $976 to move goods over 458 km on a land supply chain in India, German companies could move goods over 407 km in just 1.41 days at a substantially lower cost of $354. All these data indicate the large potential for cutting down transaction costs in India and boosting exports if the committee takes up the issues with commitment and determination.
