Focus on Logistics Infrastructure to Boost Trade Facilitation

The Infrastructure sector is the key driver of the Indian economy. The sector has received intense focus from the government for initiating policies that would ensure time bound creation of world-class infrastructure in the country. The promising Union Budget 2019 – 2020 is unequivocal in emphasizing the government’s focus on infrastructure, with the massive push and impetus given to the infrastructure sector through some great initiatives and announcements. This Budget can also be seen as the first step by the government, towards the impressive goal of doubling the Indian Economy to 5 trillion dollars within the next 5 years. The path to be undertaken for achieving the set desirable goal is also on the correct lines. The announcement and coverage of development, as proposed in the Union Budget 2020, shall prove to be a holistic, sustainable and impact development to the infrastructure sector.

The Governments vision to boost the logistics infrastructure sector has been clear in the Union Budget 2019-20 with a proposed investment of Rs 50 lakh crores during the years 2018-2030 in the Indian Railways. Use of Public-Private Partnership in Railways, has also been proposed to unleash faster development and completion of tracks, rolling stock manufacturing and delivery of passenger freight services. For the current year, a target of 7000-km roads has been set up. The National Highway Program will be restructured to ensure development of a National Highway Grid, using a financeable model. Road corridor project Bharatmala, port-linked industrialization plan Sagarmala and industrial corridors, will improve transport infrastructure, thereby helping to increase the connectivity and competitiveness in the global arena. While industrial corridors can help to improve infrastructure availability for greater industrial investment, the dedicated freight corridors would mitigate the congestion of railway networks, benefitting the common man.

The performance of logistics sector in the economic development of India has never been more compelling. A robust logistics sector can go a long way in boosting India’s quest for being a manufacturing giant given that several initiatives like ‘Make in India’ have been launched by the government and it will also play a significant role in achieving the desired goal of becoming a USD 5 trillion Economy. The industry has seen rapid growth in the last few years due to increased planned outlay of the government, improved infrastructure facilities and greater access to global markets. However, our services have not adequately capitalized on the opportunity in the global market as multiple challenges continue to mire the sector.

In India’s underleveraged market, the country’s hindrance of infrastructure cramped the growth of logistics sector by inadequate and low quality modal, terminal transport infrastructure, inefficient warehouse facilities for cargo and containers and poor adaption of technology. This triggered high cost of expense and continuation of prolonged sub-optimal system. The multiplier effect of infrastructure spending on growth is extensive and a timely completion of infrastructure projects can bring back economic competitiveness and reduce logistical costs. India is ranked at 44th rank on logistics Performance Index (LPI) which is relatively high as compared to that of other nations with similar income levels. This is not good news as the country’s Logistics Performed Index (LPI) position surpassed from 54th in 2014 to 35th in 2016 and from there we again slipped to 44th Rank in the year 2018. The continuing and prolonged suboptimal system, which erroneously appears to be in equilibrium, needs to be changed. The way to strengthen the Indian logistics infrastructure is about deconstructing the old and building a new rational equilibrium.

The Government has reiterated its steadfast commitment to modernizing the functionalities of Indian logistics with a key cognizance on infrastructure improvement. While this is signifying improving of this sector, several challenges of infrastructure deficiency, lack of skill manpower, slow adoption of technology cramped growth of the logistics sector.

In order to further improvise the Indian logistics transportation services the government needs to focus on the following areas:

1.  The capacity, condition, and predictability of these services, and their seamless integration into a multimodal system will need to be improvised.

2. The ‘trunk route- feeder network’ approach should be put to practice for integration and development of logistics infrastructure.

3. Extensive reforms must be driven to encourage and build a long way in developing a separate network of high capacity rail freight infrastructure across the country.

4. A need to develop the digital platform for the logistics community to provide information, documentation and liability regime across various components.

Currently, the sector is still plagued with unreliability, delays, frequent damage to cargo, and cumbersome processes. In fact, it is almost obligatory for businesses to set up their own in-house logistics departments in order to overcome these deficiencies and connect the dots between the different components of the logistics chain. The effort in the years ahead is to build a more robust logistics network in the country. With better infrastructure planning, increased coordination among stakeholders and improved operational efficiencies, India aims to unlock the potential of the sector needed to fuel economic growth.