Fixing its domestic logistics has always been an imperative for India—more so now, given that the country aims to become a key player in the global supply chain. India’s logistics costs, at 13% of its gross domestic product, may be comparable with China’s, but is quite high compared to developed economies such as the US, South Korea, Singapore, and EU member-nations (7-10%). India saw its score slide on the World Bank’s Logistics Performance Index (LPI) in 2018 from the peak reached in 2016. It clocked a sharper gap with China on infrastructure than on competence and quality of logistics services, which underlines the immense potential for a surge in competitiveness if infrastructure is fixed. While there has been significant infrastructure addition in the country since the 2018 LPI, the PM Gati Shakti National Master Plan for multi-modal connectivity for various economic zones is expected to meet a large portion of India’s infrastructure needs. But, logistics covers more than just transport, and there is significant scope to improve efficiency across segments—be it warehousing, order processing, inventory, etc. To that end, last week’s announcement of the National Logistics Policy should offer a major boost to India’s logistics competitiveness, if implemented in right earnest and in robust partnership with states.
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The policy seeks to bring logistics costs, as a percentage of the GDP, to a single-digit figure, which could give India’s exports a huge fillip. The focus, among other things, will be on digitalisation and timeliness. Against this backdrop, the proposal to have a Unified Logistics Interface Platform (ULIP) that would bring together 30 logistics digital systems across ministries and departments will help break data and governance silos that are a drag on timely service delivery and the overall efficiency of the sector. For perspective, there are over 20 government agencies that are part of the sector’s governance, and a requirement of some 500 certifications. ULIP is expected to aid all stakeholders in the logistics chain to improve service delivery. For instance, transport service providers can get linked to demand much faster, reducing idling of capacity and pushing up cost-efficiencies in the process. Accountability will be facilitated by the Ease of Logistics (e-LogS), a digital dashboard for registering, coordinating and monitoring time-bound resolution of problems as they crop up. The NLP also talks of sector-specific logistics plan and setting standards for logistics infrastructure. For instance, a handbook of benchmarks has already been compiled for the warehousing segment to bring it closer to meeting global best practices.
With the many positives, it remains to be seen how the NLP complements the various infrastructure programmes that the government has undertaken, especially in the transportation segment—the dominant mode of cargo transportation. The roads sector has seen much capacity addition but questions remain on adequacy, quality, and safety, among others. Additionally, the sector will continue to have a much heavier carbon footprint than other modes of transport, and given the net zero goal, the reliance needs to shift largely to railways, which remains hamstrung by its own set of issues, including capacity and infrastructure enhancement and cost-competitiveness. Fostering real partnerships with and among states will be key. Common ambitions and action-points under the NLP and state logistics plans need to be identified and efforts streamlined. Bringing logistics costs down to 8% by 2030 and improving LPI performance to rank among the top-25 will need states to play ball.