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Contents
- 1 About WB’s Logistics Performance Index, 2023
- 2 What are the benefits for India in the improvement of its the ranks in the Logistics Performance Index, 2023?
- 3 How is the World Bank Logistics Performance Index better than World Bank’s Ease of Doing Business Index?
- 4 What measures can be taken by India to improve its ranking further in the Logistics Performance Index?
- 5 What are other areas that India also needs to focus on?
Source: The post is based on the article “Logistics makes the world go around” published in Business Standard on 19th May 2023.
Syllabus: GS 3 – Infrastructure
Relevance: measures needed by India to improve its rank in World Bank’s Logistics Performance Index.
News: India has jumped six ranks to 38th position among 139 countries on the World Bank’s Logistics Performance Index for 2023.
About WB’s Logistics Performance Index, 2023
The Logistics Index is built on six components – 1) the efficiency of customs, 2) the quality of trade and transport infrastructure, 3) the ease of arranging competitively priced shipments, 4) the quality and competence of logistics services, 5) the ability to track consignments, and 6) timeliness.
India has beaten key ASEAN (Association of Southeast Asian Nations) competitors like Indonesia, Vietnam, and the Philippines, in the index.
What are the benefits for India in the improvement of its the ranks in the Logistics Performance Index, 2023?
- a) it helps lower the cost of doing business in India, and b) it will help India’s exports and make the country a more attractive destination for investment, especially in the manufacturing sector.
How is the World Bank Logistics Performance Index better than World Bank’s Ease of Doing Business Index?
The World Bank’s Ease of Doing Business Index was flawed because the index was based on judgements of experts and not on surveys of real businesses.
The Index was based on the idea that less regulation is always better, which was a wrong narrative. For instance, the recent failure of Silicon Valley Bank has been due to the weakening regulation of mid-size banks since 2019.
The flaws that existed with the World Bank’s Ease of Doing Business are not present in the World Bank’s Logistics Performance Index. Hence, the rank in this index holds a significant importance.
Read More: Lessons from the death of the ease of doing business index
What measures can be taken by India to improve its ranking further in the Logistics Performance Index?
India should focus on improving its score further because its competitors are trying to improve.
For instance, Thailand is slightly ahead of India because of better scores on two components — customs and trade and transport infrastructure.
Therefore, India must also focus on the efficiency of its customs system because India’s custom score has fallen since 2016.
India can take some technical assistance from Singapore, which has the best customs efficiency in the world. An improvement in the score for customs efficiency will have huge benefits for India.
What are other areas that India also needs to focus on?
In addition to the custom, India should also focus on –
Cost of fuel: Before the depreciation of the rupee, diesel prices in India were much higher than in many East Asian countries. However, even after the depreciation of the rupee, diesel prices remain 10 percent higher than in China.
Electricity: Electricity prices are cheaper for consumers than for producers. Due to which, discoms are often at loss.
Freight: India’s rail freight rates for goods needs to be reviewed. This is because even with the recent rupee depreciation of 10 percent, Indian rail freight rates are among the highest in the world.
