[Answered] India’s policy push for self-reliant manufacturing and green growth can deliver big benefits once logistical efficiency goes up. Elaborate.

The World Bank Logistics Performance Index 2018 had ranked India 44th out of 160 nations. China and Vietnam did better than India with 26th and 39th ranks respectively.  Initiatives like PM Gati Shakti and the National Logistics Policy lay a foundation for India to seize its opportunity to become an integral part of global supply chains.

Significance of logistics for manufacturing and green growth:

• 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%.
• The implementation of digital solutions like FastTag for road traffic has brought about an estimated reduction in carbon dioxide emissions of nearly 1 million tonnes. Projects like these will help India reach its stated climate ambitions even faster.
• Cloud-based IT systems, integration and coordination among Indian logistical service suppliers and the signing up of small service providers also increase efficiency.
• Inland waterways provide a cost-efficient and environment-friendly way to move goods. Inland port development must become a priority for the Government.
• A technology-driven documentation approach would highly impact the logistic sector by avoiding transit delays and untimely deliveries caused due to improper documentation.

Challenges:

• Port Sector Issues: The turnaround times for ships are high (~62 hours in 2020-21, ~8 hours in Japan). In addition, time consuming custom clearances add to delay.
• Tax Structure: Multiple State and Center taxes lead to considerable loss of time in transit on roads.
• Fuel Costs: Higher fuel prices increase the transportation costs. Rising fuel prices are increasing the surcharges to the freight tariffs. This reduces profitability of the logistics sector.
• Government Regulations: Carriers face significant compliance regulations imposed by State Governments and local authorities. It causes time overruns and disruption in supply chains.
• Fragmented Sector: Unorganized players control 90% of the logistics market. Fragmentation leads to low margins which prevents investments to scale-up operations or adoption of new efficient digital technologies.
• Waterways have a meagre share of ~5%. The higher logistics cost is leading to a competitiveness gapof US$ 180 billion for India. The difference will increase to US$ 500 billion by 2030.

India aims to become US$ 5 Trillion economy in the near term and a developed economy by 2047. For this, connectivity and robust infrastructure will become crucial points.