India needs to institute a framework that facilitates convergence and integration of various initiatives taken to bolster the logistics sector, as our logistics costs account for as much as 15-16% of the consignment value, eroding trade competitiveness, according to a paper by Bibek Debroy, chairman of the Prime Minister’s Economic Advisory Council, and Kishore Desai.
Despite progress made in the past three years, it takes more than 6 days to export and more than 13 days to import and India’s logistics costs are higher than those of around 10% (of consignment value) in developed nations. The sector contributes to more than 13% of India’s GDP and employs more than 22 million.
The report says while the government is taking all the right reform measures, the involvement of multiple departments and agencies is somewhere limiting the efficacy of these reforms. So it suggests a framework that comprises three broad policy actions: converging multi-departmental actions into an integrated logistics policy; creation of an integrated digital platform to facilitate paperless environment across the logistics value chain; setting up a mechanism for periodic diagnostics and benchmarking of sectoral outputs.
In fact, around 70% of the delays (both in exports and imports across Delhi and Mumbai) are on the account of port or border handling processes, which essentially pertain to the multiplicity and complexity of the overall procedures at ports.
The introduction of the goods and services tax will also boost the development of the logistics sector, says the report. The GST regime will not only reduce complexities generated by multitude of indirect taxes that slowed trade, but also benefit the logistics sector by facilitating faster conversion of informal logistics setups to formal setups and increasing the speed of movement of freight at inter-state borders due to dismantling of check posts.
“This integration is needed to ensure that the reforms deliver results they intend to and that too within a short time frame. This is also a must to realise the ambitious target, articulated by Prime Minister Narendra Modi , to achieve top 50 rank in DB (doing business ranking of the World Bank) in the next 3-5 years,” says the report by Debroy and his officer on special duty, Desai.
‘Trading across the border’ (in which logistics play a key role) was one of three parametres where India’s rank dropped in the World Bank’s index on ease of doing business this year, although the country’s ranking in the overall index jumped an unprecedented 30 notches this year.
In trading across borders, the country was placed at 146th position this year, compared with 143rd last year. India’s overall rank, however, improved to 100th for the first time among 190 nations, against 130th last year.