India to save $50 bn if logistics costs cut down

India can save around $50 billion, if logistics costs are cut to 9% from 14% of the GDP.  

The Dollar Business Bureau

If the logistics costs are lowered from the current 14 percent to 9 percent of the gross domestic product (GDP), India can save around $50 billion, revealed a joint study by Associated Chambers of Commerce and Industry of India (ASSOCHAM) and Resurgent India.

According to the study, the reduction in logistics costs would further make domestic goods more competitive in the international markets. With various initiatives of the government to promote manufacturing sector in the country, the logistics industry can achieve a growth rate of 16 percent in the coming years.

“‘Make in India’ campaign would attract new flow of investments that connect the country with international production networks. This would support Indian logistics sector in generating more business. Further, the country can become a global logistics hub doing business at par with other major economies in the world,” the study said.

Better service delivery and customer satisfaction are the main components for the growth of logistics industry. If the exports from the country increase, it would result in creation of more job opportunities. The government should focus on improvement of the logistics infrastructure to help in cutting down the costs. This can boost GDP and create more employment opportunities in the country, it added.

D S Rawat, Secretary General of ASSOCHAM said that the growth of Indian cargo and logistics industry depends on appropriate policy changes. Increasing the capacity and pace in transporting the products is also required for the overall development of this sector. Bulk commodities can be transported via waterways to free up the capacity for fast moving products.

The government should set benchmarks and standards to bring uniformity of transport infrastructure, warehouses and storage facilities. Logistics service providers should have access to cheap capital for providing longer credit periods to their clients and also in supporting their working capital, the study recommended.

It further said that uniform tax structure should be created to eliminate multiple checkpoints and documentation needs. This would help in speedy delivery of goods. The goods and services tax (GST) when implemented would definitely improve the performance of logistics sector by bringing down distribution costs by up to 15 percent.


The Dollar Business Bureau - May 02, 2016 12:00 IST