Digitise Indian trade to protect it against future supply-chain disruptions

September 4, 2020 7:15 AM

Though Digital India has been a focus of the government for a few years now, evidence suggests that India lags still lags developed countries in this area.

Covid-19 and the ensuing closures laid bare the problems that this lack of digitisation has caused in maintaining supply-chains.Covid-19 and the ensuing closures laid bare the problems that this lack of digitisation has caused in maintaining supply-chains.

By Bimal Kanal

The pandemic has not spared India, and its effects on our economy have been catastrophic. To bounce back, we need to reinvigorate industrial production, business activity, and consumer confidence. One step that must be considered is the pursuit of trade modernisation through digitisation. Though Digital India has been a focus of the government for a few years now, evidence suggests that India lags still lags developed countries in this area.

In fact, a report by Research and Information System for Developing Countries, from 2019, found that India’s digital transformation has neglected trade infrastructure and that the lack of value-adding digital services is hampering India’s international competitiveness.

Covid-19 and the ensuing closures laid bare the problems that this lack of digitisation has caused in maintaining supply-chains. Far too many of the processes involved in trade, including customs clearance, must be conducted in person, including the need to sign documents, obtain postage, and hand over paper pouches to customs officials. Examples of documents that have been traditionally requiring paper-based transactions to process include commercial invoices, packing lists, bills of lading, freight manifests, arrival notices and insurance policies, and many more. In short, when India works from home, trade cannot continue, to the detriment of countless jobs, livelihoods, and economic revival.

Fortunately, there are signs of movement on this issue with several steps taken by Customs to digitise the processes. In late April, the government also fast-tracked its approval process for digitised Bills of Lading. By accepting digital versions of these documents, India will take a major step forward in terms of its trade sector’s digital competitiveness. If we take the Bill of Lading as an example—it is a document that must travel from carrier to shipper to consignee and back to the carrier at the destination and, on the way, potentially go through several other stakeholders. By digitising this document, it is possible to transfer it in the right sequence from one stakeholder to the next with just a click of a button. And, on certain platforms, this document can go through blockchain that ensures there is an immutable audit trail and “permissioned” transparency.

A study from the consultancy QBIS shed some light on just how costly this lack of competitiveness is, using the specific example of imports and exports through Nhava Sheva, India’s largest port. The consultants estimate that trade digitisation could save Nhava Sheva importers up to Rs 17 billion each year. Nationwide, the estimate of savings from trade digitisation could be as much as Rs 65 billion.

While the pandemic has been devastating, it has also presented the opportunity for transformational change. Manufacturers are looking to diversify their sourcing operations; initially, most were evaluating Vietnam, Taiwan, and Thailand, but India is now gaining traction as a strong alternative. Research suggests that fuller participation in global value chains would lead to the creation of an estimated 40 million new jobs by 2025 and 80 million by 2030. These numbers come from pre-pandemic research, but point to the potential if better, more modern trade practices continue to be embraced.

For rebuilding India’s economy, modernising our trade infrastructure so that India’s importers and exporters are not further strapped by long customs waits is key. The government should move more quickly on the digitisation of trade infrastructure. This will not only help India’s economy weather future supply-chain disruptions but also help bring about more production, jobs and prosperity.

The author is Head, TradeLens India

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