Ease of moving – Lower logistics costs will boost output

Source– The post is based on the article “Ease of moving-Lower logistics costs will boost output” published in the Business Standard on 19th September 2022.

Syllabus: GS 3 – Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

Relevance– About the benefits of National Logistics Policy(NLP).

News: The Prime Minister has recently launched National Logistics Policy(NLP) to help Indian businesses improve efficiency.

What are the previous reforms in the Logistics sector?

a) The Union government created the Logistics Division in the Department of Commerce in 2017 to enable the integrated development of the sector, b) A draft logistics policy was published in 2019, but the implementation was delayed, partly because of the pandemic, c) The government recently revised the land use policy of the Indian Railways to enable longer-term leasing of surplus railway land at a much lower rate for setting up cargo terminals, among other things, d) A number of state governments have formed their logistics policy.

What are the expected benefits of NLP?

Improve infrastructure: India’s infrastructure deficit is often regarded as one of the biggest constraints in rapid economic growth. The NLP will improve India’s logistical infrastructure.

Address the fragmentation: India’s logistics sector is extremely fragmented, which adds to the cost of doing business. According to one estimate, the sector involves over 20 government agencies and a host of certifications.

Creates employment: An increase in systemic efficiency will boost overall activity and help create employment even in the logistics sector, which supports the livelihood of over 22 million people.

Brings digital service providers together: Along with the NLP, the recently launched Unified Logistics Interface Platform will help bring all digital services in the transport sector to a single portal.

Increase exports: Lower logistics costs will make Indian businesses more competitive and help push up exports, which can become an important driver of growth and employment generation over the medium term. For instance, a 10% reduction in logistics costs is estimated to push up exports by 5-8%.

Further, the logistics policy will build on the PM Gatishakti plan, which is expected to provide multimodal connectivity in various economic zones.

What should be done to improve the logistics sector?

a) The Union and all state governments work together to address inefficiencies in the logistics sector, b) The overall objective of reducing logistics costs by NLP will depend on sustained investment in the infrastructure sector. So the government should frame attractive policies to sustain investment in the sector.