The world over, poor logistics often means poor trade. Logistics is a series of services and activities that constitute supply chains.
These include transportation, warehousing, brokerages and so on.
This includes both “hard” or physical infrastructure as well as “soft” or institutional infrastructure such as systems, procedures and regulations.
Trucks, for instance, use publicly funded roads and highways, while international trade is subject to the procedures followed by border agencies.
Some estimates suggest that logistics costs in India amounted to a sizeable 14% of gross domestic product (GDP) in 2014.
It is also suggested that inefficient logistics chip off a whopping $45 billion from India’s economic output, or about 2% of the country’s GDP.
Hard infrastructure being improved
For hard infrastructure, seven new multimodal freight corridors are on the anvil, and work on some is well under way.
These include the Western and Eastern Dedicated Freight Corridors where high-speed trains will run along electrified freight-only tracks from the hinterland to ports on the western and eastern coasts.
In the Ganga basin, the eastern rail freight corridor will link up with the highways, in addition to the proposed Ganga waterway, enabling goods to switch seamlessly from rail to road to barge to ship in an unbroken continuum.
Along the way, 15 logistic parks will serve as transport and service hubs.
Higher global ranking
So, have India’s recent efforts to improve its global logistics ranking borne fruit? On this, there is good news.
The World Bank’s 2016 Logistics Performance Index (LPI), which ranks 160 countries every two years, found that India moved up to 35th place internationally, compared to 54 in 2014.
In other words, within two years, India had improved its logistics performance significantly. Globally, Germany stood first for the third time running, while China stood at 27, South Africa at 20, and Russia at 99.
The World Bank’s LPI found that when compared to other countries, including other nations of the Brazil-Russia-India-South Africa grouping, the Indian operators surveyed were especially positive regarding improvements in areas such as the supporting infrastructure for trade (e.g. ports) and the processing of goods by customs.
These findings should give a shot in the arm to the government’s efforts to boost the business environment.
Soft infrastructure too needs attention
On the equally imperative softer aspects of logistics, the GST is most certainly a major step forward.
However, to reap the full benefits of GST on inter-state trade, more will be needed.
Today, a truck on an Indian highway reportedly covers an average of 250- 300km per day, compared to 450km in Brazil, and 800km in the US.
Studies have found that for up to 60% of journey time, the truck is not moving at all—a large part of that time is spent at checkpoints getting tax and customs clearances.
These difficulties can have a substantial impact on freight routes: For example, exporters from manufacturing hubs like Tirupur and Coimbatore in Tamil Nadu report diverting their shipments by several hundred kilometres just to avoid the Tamil Nadu-Kerala border crossing.
With inputs from: The Economic Times
Image link : Internet sources