Logistics: On the right track to ease of doing business

Published: December 28, 2017 2:09 AM

Logistics, ease of doing business, economy, world bank, indiaState-of-the-art infrastructure and seamless connectivity are the missing links in the ease of doing business for logistics.

It is evident that improving competitiveness is one of the government’s top priority areas. While the progress is laudable, the government has the ambitious aim of positioning India among the top 50 nations and has planned a series of initiatives in line with this vision. Recently, Kristalina Georgieva, the World Bank CEO, said India is on track to become a high middle-income economy by 2047. But the country needs to move fast to further improve its ease of doing business ranking, and focus on areas like construction permits or conflict resolution to make sure it’s not the job of just one department, but everyone concerned in the regulatory process.

What will bring the next wave to the ease of doing business in India is improvement in logistics and infrastructure, which continues to be a major roadblock. The government has started taking active steps in this direction—like chalking out the strategy to move up further with a focus on improving logistics, port infrastructure and connectivity. Rollout of GST has been able to weave the country into one market with one tax and removed interstate barriers for trade. The current ranking does not take into account the big transformation of business environment, as it accounts for changes incorporated till May 31, 2017.

GST is an effort to simplify licensing and tax structures, making India a far more investment-friendly place, encourage entrepreneurship and consequently strengthen the GDP. Even as the business fraternity is still grappling with new systems and processes, the policy is here to stay and will benefit in the long run. Post-GST implementation, companies have started adopting the hub-and-spoke model of warehousing operations to get closer to either the area of manufacturing or consumption. With border check posts removed, the overall efforts are expected to bring down warehousing cost by around 10-15%.

State-of-the-art infrastructure and seamless connectivity are the missing links in the ease of doing business for logistics. The government’s investment in Multi Modal Logistics Parks entails a plan for a network of 35 such parks to be set up on a pan-India basis. While 15 parks are planned to be built over next five years, another 20 are expected to be constructed over a period of 10 years. Given the dynamic and diversified geography of the country and the existing logistics infrastructure, Multi Modal Logistics Parks are the natural way to go forward for India. These will help cut costs considerably, bring in economies of scale and improve productivity by providing everything under one roof.

Apart from removing business hurdles, the government has announced plans to boost infrastructure. The Bharatmala project will help connect various corridors, ensuring seamless movement of goods within the country. The government has announced a massive infrastructure push to achieve the target of Rs 25 lakh crore worth of work in the highways and shipping space in five years, creating 1 crore jobs and expecting or targeting to contribute 2-3% to the GDP. This project will improve connectivity and movement of goods, which will, in turn, steer economic activity and create jobs.

The single-window system is another trade facilitation idea. The implementation of a single-window enables international (cross-border) traders to submit regulatory documents at a single location and/or single entity. Such documents are typically customs declarations, applications for import/export permits, and supporting papers such as certificates of origin and trading invoices. Here, technology has acted as a catalyst in the entire reformation coupled with the support of business-friendly policies. The conscious efforts to move towards e-compliance to reduce manual paperwork through initiatives like e-sanchet are steps towards ease of doing business. E-compliance coupled with the technology push is a major step towards Digital India.

Traditionally, the cost of logistics in India as compared to the overall product cost is around 13-14%, which is comparatively higher as compared to the global averages of around 10% (in the developed economies). We are walking on the right path, only that we need to move at a faster pace with serious efforts in implementation of the proposed policies and reforms in improving the logistics and infrastructure of the country.

Deepal Shah is CEO, Customs Clearance & Freight Forwarding, Avvashya CCI Logistics. Views are personal.

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