India’s Logistics Decoded

Ever wondered why India, despite being a food surplus country, still witnesses hunger, especially in tier 2 and lower areas? 🤔

• In one line: It’s due to high logistics cost 🤯

Problem:

• The high logistics cost stemmed from inefficient transportation and suboptimal utilization of various transportation modes
• For example: The empty running rate of trucks in India is 40%, which is double compared to the United States.
• FYI: India’s logistics cost accounts for 8% of GDP ( ₹21 Lakh Crores)

Why is this logistics cost problem is burden on the Indian economy?

a) 📶 Logistics Performance Index (LPI):

• LPI of India was 3.4 and ranked 38th in global rankings 😢
• In short, the LPI score reflects perceptions of a country’s logistics based on the efficiency of logistics services provided and the ability to track and trace shipments
• This LPI is measured by global companies to do large-scale business in India

b) 💵 Freight Transportation Costs:

Despite the railway’s lower transportation costs, over 70% of goods transportation in India is through roads.

Despite railway costs being low, why is it not being prioritized?

It's because of Train Speed:

1. Freight trains in India have an average speed of 25 km/hr, significantly lower than those in other developed countries, such as China which has 80 km/hr.

Speed is a crucial factor because it directly influences the quality of goods transported. Ultimately, consumers expect goods to arrive in the highest quality possible.

So, Why did India prioritize these logistics cost problems for economic growth?

From the famous Adage:

“America doesn’t build beautiful roads because it is wealthy; it is wealthy because they built beautiful roads”

📝 Countries like the USA, and Japan have grown their GDP significantly because of their full-scale infra development.

How did India plan to reduce the logistics costs??

INDIA has developed a National Logistics Policy📃 (NLP) which has focused on solving the core logistics problems

Three Pillars of NLP 📃

• Multimodal Connectivity Parks 🛜
• Digitalization 📲
• Infra Development 🏗️

Each pillar being the foundation, they introduced multiple programs.

Multimodal Connectivity: PM GATI Shakti Program

• This program focuses on creating adequate infrastructure to support the logistics sector, including the development of ports, airports, railways, and inland waterways.

Digitalization: Unified Logistics Interface Program (ULIP)

• It aims to digitize and automate logistics processes, reducing paperwork, delays, and inefficiencies.

Infra Development: Bharatmala and Sagarmala Programs 🛥️🚢

• The programs aim to have dedicated freight corridors that seek to enhance road, port, and rail infrastructure to facilitate smoother movement of goods across the country.

Impact of the programs 📊

PM GATI Shakti:

• Clearance time for the approval of projects has been reduced from 250 days to less than 40 days.

ULIP Program:

• The ULIP portal contains over 600+ logistics players🎉.
• 11.8 lakh CR transactions 🤯 have already occurred on the ULIP platform.

Bharatmala and Sagarmala Program:

1. Port Turnaround Time⏳:

• Port turnaround time was reduced from 44.7 hours to 26.5 hours

2. Cargo Dwell Time ⏰:

• Average dwell time for containers was reduced to 3 days for India between May and October 2022

As this policy implementation is still in WIP 🏋🏽,
the leading metrics as portrayed above indicate that this NLP will turn things around by boosting INDIA GDP to a $5 Trillion landmark 🎯🎯

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