+ Logistics Policy, a Game-Changer - CII Blog

In addition to improving ease of living and doing business, the newly launched National Logistics Policy, along with other pillars of PM Gati Shakti, is set to ring in ease of moving in the country, ensuring speedier and seamless movement of cargo and people across modes of transport. Executed efficiently, it will bring a paradigm shift in multimodal transport and position India as a global trendsetter in the digital and paperless logistics ecosystem.

The National Logistics Policy (NLP) 2022 is a well-timed, game-changing initiative and a comprehensive effort to enhance the efficiency of the logistics ecosystem.

It will spur the economy’s competitiveness through improved connectivity and smooth movement of goods in both domestic and international markets. A giant step towards unlocking India’s growth potential and creating jobs, the NLP will complement the PM Gati Shakti National Master Plan launched last year for integrated infrastructure development.

The vision of the NLP 2022 is to develop a technologically enabled, integrated, cost-efficient, resilient, sustainable and trusted logistics ecosystem for accelerated and inclusive growth. The NLP also has the potential to make logistics and supply chain management a sought after career for India’s youth.

Logistics and supply chains have never been part of our national policy discourse, even though the last few years underscored their importance when economies worldwide underwent nationwide lockdowns to fight Covid-19. The prime minister must be congratulated for bringing logistics and supply chain management to the forefront of policy discussions. 

The estimated cost of national logistics is 13–14% of GDP—which is higher than that of the US, Europe, and China. The NLP aims to reduce this cost to less than 10%, comparable to global benchmarks, and improve the country’s logistics performance index ranking and global positioning by 2030.

The policy is the end product of a series of steps taken after forming the Logistics Division under the Ministry of Commerce and Industry. Sagarmala and Bharatmala and dedicated freight corridors have improved logistics connectivity for systematic infrastructure development. The efficiency of the logistics sector has also significantly increased with initiatives like the paperless EXIM trade process through eSanchit, faceless assessment for customs, provisions for e-way bills, etc.

The NLP complements such initiatives by laying down an overarching interdisciplinary, cross-sectoral, multi-jurisdictional and comprehensive policy framework for the logistics sector.

India is a federal country, and much of the public goods and services delivery in critical areas is done by state governments. Therefore, the role of states in joining this journey is indispensable, especially for first and last-mile connectivity and delivery. It bodes well for a successful rollout of the NLP that all states and UTs have been onboarded, with 14 states already having developed their respective state logistics policies on the lines of the NLP. It is in the draft stage for another 13 states.

By 2047, it is estimated that India’s GDP, with real growth of 5%, will touch $25 trillion. At the same time, the potential logistics market size is expected to be $1.5–2 trillion, growing at 7.5–8% CAGR, as the logistics market expands 1.5 times the GDP. The current size of the Indian logistics sector is estimated to be $250 billion. This potential six- to eight-fold increase in the size of the logistics sector in the next 25 years would make it a key enabler of the Indian manufacturing industry in global value chains led by Indian logistics champion organisations and professionals.

The Confederation of Indian Industry (CII) has worked on a multi-stage and multi-step 25-year vision for India’s logistics sector. Ten key enablers have been identified to help achieve targets set for Indian logistics. These are: Standardisation in logistics, commodity-wise focus, outsourcing by user industry, digitalisation of documentation and processes, infrastructure integration and upgrade, globally benchmarked institutional infrastructure for skill development, support for logistics start-ups, focus on sustainability goals, branding, and investments in research and development.

Four potential impediments have also been identified in achieving the targets: first-mile and last-mile connectivity, digital interface standards for domestic trade but especially cross-border trade, land availability for establishing logistics infrastructure in strategic locations, and the high capital cost for establishing logistics projects. These can be addressed through PM Gati Shakti and the NLP.

It is also suggested that the government establish a logistics committee to monitor the implementation of policies and processes at three levels—strategies, implementation, and developmental initiatives. This could be done by involving both users and service providers with a clear mandate on outcomes and timelines.

The share of manufacturing in India’s GDP has stagnated at 17–18% for the last decade. It is well known that manufacturing has the greatest potential to create steady, high-value employment opportunities for India’s young population. The NLP, focusing on achieving higher logistics efficiency, would facilitate an increase in manufacturing output and enhance the share in global trade.

Increased specialisation of individuals and businesses is the hallmark of any modern economy, India included. With a higher degree of specialisation comes incentives to outsource more, which means linkages and dependency spread over an increased number of businesses. This also means that the importance of logistics and supply chain management is that much higher.

In such a complex world, a national logistics portal which collates and updates information in real-time on goods, vehicle flow and availability of capacity and logistics assets across the transportation network is needed. It will be a great addition in making available the necessary information for businesses to make more informed trade and investment decisions. This will solve the problem of information asymmetry and help foster a level playing field for businesses. The growth opportunities arising from the NLP will truly catapult India forward on its developmental journey.

The article first appeared in The New Indian Express on 19 October 2022.