‘Logistics costs drop to 7.8%­8.9% of GDP’

‘Logistics costs drop to 7.8%­8.9% of GDP’

Subject :Economy

Section: Infrastructure

Context:

India’s logistic costs ranged between 7.8% and 8.9% during 2021-22, down from 8.7-9.9% during 2011-12, according to a report by economic think tank National Council of Applied Economic Research (NCAER) and the Department for Promotion of Industry and Internal Trade (DPIIT).

What Aspects Led to India’s Improved Logistics Performance?

• Policy Interventions:
  • PM Gati Shakti Initiative: In October 2021, government announced the PM Gati Shakti initiative, a National Master Plan for multimodal connectivity.
  • This initiative aims to reduce logistics costs and boost the economy by 2024-25.
  • National Logistics Policy (NLP): The PM launched the National Logistics Policy (NLP) in 2022 to ensure quick last-mile delivery, end transport-related challenges, save time and money for the manufacturing sector and ensure desired speed in the logistics sector.
  • These policy interventions are fructifying, which can be seen in India’s jump in Logistic Performance Index(LPI) and its other parameters.
• Infrastructure Improvements:
  • According to the LPI report, India’s rank moved up five places in the infrastructure score from 52nd in 2018 to 47th in 2023.
  • The government has invested in trade-related soft and hard infrastructure, connecting port gateways on both coasts to the major economic centers located in the interior regions of the country.
  • This investment has paid off, with India climbing to the 22nd spot for international shipments in 2023 from 44th in 2018.
• Technology’s Role:
  • Technology has been a critical component of India’s logistics performance improvement efforts.
  • Under a public-private partnership, the government has implemented a supply chain visibility platform, which has contributed to remarkable reductions in delays.
  • NICDC Logistics Data Services Limited applies radio frequency identification tags to containers and offers consignees end-to-end tracking of their supply chain.
  • The report also states that emerging economies like India are leap frogging advanced countries due to modernization and digitalization.
• Reduced Dwell Time:
  • Dwell time is how long a vessel spends at a specific port or terminal. It may also refer to the amount of time that a container or cargo spends at a port or terminal before being loaded onto a vessel or after being unloaded from a vessel.
  • India’s very low dwell time (2.6 days) is one example of how the country has improved its logistics performance.
  • According to the report, the average dwell time for containers between May and October 2022 was 3 days for India and Singapore, much better than in some of the industrialized countries.
  • The dwell time for the U.S. was 7 days and for Germany, it was 10 days.
  • With the introduction of cargo tracking, dwell time in the eastern port of Visakhapatnam fell from 32.4 days in 2015 to 5.3 days in 2019.

What are the other Initiatives Related to Logistics?

• Multimodal Transportation of Goods Act, 1993: The Multimodal Transportation of Goods Act, 1993 (MMTG) provides for the regulation of Multimodal Transportation of Goods from any place in India to any place outside India involving two or more modes of Transport on the basis of a single Multimodal Transport Contract. 
• Multi Modal Logistics Parks: The Multi Modal Logistic Park project is poised to develop state-of-the-art large scale warehousing facilities for different types of commodities, to become a one stop solution for all services related to cargo movement like warehousing, custom clearance, parking, maintenance of trucks etc.
• LEADS Report: The LEADS is an indigenous data-driven index under the Ministry of Commerce and Industry to assess logistics infrastructure, services, and human resources across all 36 States and UTs.
• Dedicated Freight Corridor: It is a high speed and high capacity railway corridor that is exclusively meant for the transportation of freight, or in other words, goods and commodities.DFC consists of two arms, Eastern Dedicated Freight Corridor (EDFC) and Western Dedicated Freight Corridor (WDFC).
• Sagarmala Projects: The Sagarmala Programme was approved by the Union Cabinet in 2015 which aims at holistic port infrastructure development along the 7,516-km long coastline through modernisation, mechanization and computerisation.
• Bharatmala Project: It focuses on the new initiatives like development of Border and International connectivity roads, Coastal & port connectivity roads, improving efficiency of National Corridors, Economic corridors and others.