As India moves towards its goal for a USD 5 trillion economy, the need for industry to be aggressive, competitive, and productive will be the key value add to drive the country beyond. For this, the imperative would be to improve the ease of doing business and one of the most important components of this plan would be logistics. Though the recent announcement by DPIIT that India’s logistics cost ranged from 7.8% – 8.9% of GDP for the year 2021-22 seems to be significantly lower than expectations, there is a now a need to focus beyond cost.
Countries measure their logistics effectiveness through the World Bank’s Logistics performance index (LPI) which cover aspects of infrastructure, competence, traceability, and several other factors as its component. In the last several years, India has moved up the ranks considerably and is now positioned at number 38. However, we have a long way to go and focusing more on the drivers of performance and productivity will ensure our products are domestically and globally competitive against other nations.
The country has made immense progress over the last decade when it comes to logistics efficiency. As per an IIMC-TCI study in 2014-15, the average speed of a truck in India was just 35 kmph which is now closer to 50 kmph. Better roads and highways, expansion of port capacity, digitization of trade documentation and digital transactions including the use of fastags for tolled roads have all contributed to a significantly robust logistics ecosystem. The National Logistics policy, now in its sophomore year, has clearly illustrated the need to increase multimodal logistics, lean heavily on digitization and build national standards.
At a macro level, logistics infrastructure must be built with a long-range perspective of 20 years and more. Shift towards seamless multimodal logistics not just for cost benefits but to reduce carbon emissions should be incentivized. The 22m people employed in this sector needs a very strong skilling ecosystem for current and future skills and national recognition for their contribution to society.
At ground level, process improvements at users and service providers will provide significant upside to productivity growth. Trucks stand for days at factories and warehouses for loading and unloading of cargo, companies insist for physical proof of delivery (POD) & physical invoices from providers vs digital, shift from ‘head load’ to palletization of cargo, increased discipline around supplier credit, deep focus on quality and several such rudimentary yet ignored measures need urgent focus.
As our country integrates into global supply chains, logistics can be that value driver to propel us towards a USD 10 trillion economy. The era to move towards efficient and productive logistics has begun.
