Relevance: GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment
Key phrases: (LEADS) 2021, supply chain system, warehousing , logistics performance index, Regulatory cholesterol, (NLEAPS), BHARATMALA, SAGARMALA, Logistics Efficiency Enhancement Programme, FASTags
Why in News ?
- Recently, the Ministry of Commerce and Industry has crafted the Logistics Ease Across Different States (LEADS) 2021 to analyse the business environment in all State/UTs pertaining to infrastructure, policy, and regulatory regime for improving logistics efficiency in India.
What is Logistics?
- Logistics is management of flow of goods from origin to destination to meet customer requirements in minimum time at minimum cost. It is a supply chain system which ensures delivery of the right product, at the right place, at the right time in proper condition, all for a reasonable cost in turn fuels growth. It includes packaging, warehousing, transport and delivery of raw materials and final goods.
Logistics Facts in India
- The cost of logistics in India is 14% of the gross domestic product (which is over $2.5 trillion) and is much higher than in other countries.
- The target is to reduce it to about 10% in the coming years with concrete measures.
- India slipped from 35 in 2016 to 44 in 2018 in the Logistics Performance Index of the World Bank.
Reasons of inefficient logistics in India
- Lack of basic infrastructure.
- The sector continues to be highly unorganized.
- India also has a skewed modal transportation mix, with 60% of freight moving on roads, which is significantly larger than in key developed economies.
- Regulatory cholesterol in the logistics supply chain that reduces competitiveness of Indian goods in domestic and international markets.
- Factors like geography, terrain, resource base and economic activity act as natural deterrents for the development and management of a robust logistics infrastructure
Steps taken by the government
- Infrastructure status has been given to logistics
- BHARATMALA, SAGARMALA, Dedicated Fright corridors, National waterways 1, many other mega projects in infrastructure
- Ratification of Trade Facilitation Agreement
- Working on suggestions of WTO Logistics Efficiency Enhancement Program (LEEP)
- Logistics Ease Across Different States (LEADS) Index
- E-way bill under GST Mandatory
- FASTags on highway toll booths
- National Logistics Efficiency and Advancement Predictability and Safety Act (NLEAPS) aims to reduce the logistics cost from the present 14% of the Gross Domestic Product (GDP) to less than 10% of GDP.
Advantages of good logistics
- Cost saving in manufacturing, transportation.
- More choices for customers.
- Environmental benefits like reducing carbon footprints and pollution.
- Increased export competitiveness of a country.
- More Job creation.
- Promote regionally balanced economic growth.
- Agriculture, animal rearing more processing more dividends to primary producers.
Logistics Performance Index
- Developed by the World Bank Group, is a benchmarking tool created for accessing logistics between the nations.
- India ranked 44th on the LPI in 2018.
- The logistics performance (LPI) is the weighted average of the country's scores on the six key dimensions:
- Efficiency of the clearance process
- Quality of trade and transport related infrastructure
- Ease of arranging competitively priced shipments.
- Competence and quality of logistics services
- Ability to track and trace consignments.
- Timeliness of shipments in reaching destinations
Way Forward
- In depth analysis of insights given by LEADS 2021 and LPI to identify the necessary reforms for improving logistics across India.
- Government should focus on both domestic and international trade barriers and use a combination of strategies along with expert advice, to enhance the logistics efficiency, and help India become $ 5 trillion economy by 2025.
Mains Question
Q. The scheme like PLI or policies like National Manufacturing Policy and National Electronics policy by itself can do little in achieving the objectives of Atma Nirbhar Bharat unless the entire logistics ecosystem is reformed. Do you agree? Give reasons to support your answer. (15 marks)
Source: The Hindu BL
