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Topic : Logistic Challenges in Trade
GS-3 Mains : Economy
Context:
- India’s June 2024 merchandise exports grew 2.55% YoY to $35.2 billion despite challenges.
Trade Performance:
- Trade Deficit: Increased to $20.98 billion (June 2024) from $19.19 billion (June 2023) due to a 20% rise in petroleum imports.
- Exports: Grew in 4 out of top 5 destinations (US, UAE, Netherlands, UK).
- Imports: China remained the top source, followed by Russia, UAE, and the US.
- Imports from China surged 18.37% YoY, Russia 18.57%, and UAE 48.15%.
- Future Projection: India might cross $800 billion in total exports this financial year, driven by services and specific goods like engineering, electronics, pharmaceuticals, and chemicals.
India’s Logistics Landscape:
- A large and growing sector crucial for economic growth.
- Connects various economic elements through transportation, warehousing, and supply chain solutions.
- Rapidly evolving due to technological advancements, infrastructure improvements, and government initiatives (GST, National Logistics Policy).
Advantages of Efficient Logistics:
- Supply Chain Efficiency: Minimizes delays and lead times, allowing businesses to meet consumer demand and optimize production.
- Connectivity & Accessibility: Enhances connections between regions and markets, fostering economic integration and wider customer reach.
- Cost Reduction & Competitiveness: Lowers transportation, storage, and distribution costs, making businesses more competitive.
- Job Creation: A significant job source in transportation, warehousing, distribution, etc. (projected to add 1 crore jobs by 2027).
- Technology Adoption: Improves operational efficiency, reduces costs, and enhances productivity through tools like GPS tracking, RFID, and advanced analytics.
- Economic Integration: Connects economic zones and promotes a seamless flow of goods and services.
Logistics Challenges for Indian Exporters:
- Lack of container availability and shipping space.
- Irregular shipping schedules and ships skipping Indian ports.
- Dependence on Chinese-made containers (impacted by EU tariffs on Chinese electric vehicles).
- Infrastructure deficits and complex regulations.
Government Initiatives in Logistics
Infrastructure Development:
- Dedicated Freight Corridors (DFCs): High-speed railway corridors for seamless goods movement (1,724 km operational as of Jan 2023).
- Multi-modal Logistics Parks (MMLPs): Parks with access to road, rail, air transport (over 100 acres each). Offer advanced storage and services (customs clearance, cold storage).
Streamlining Processes:
- Parivahan Portal: Online platform for standardized processes and information sharing (registration cards, licenses).
- E-way Bill System: Electronic documentation for inter-state movement of goods above Rs. 50,000 (eliminates physical paperwork).
Key Policy Initiatives:
- PM GatiShakti (2021): Improves logistics efficiency and reduces costs through coordinated planning across agencies. Focuses on multi-modal connectivity and timely project completion.
- National Logistics Policy (NLP, 2022): Aims for a seamless and integrated logistics sector to boost economic growth. Plans for:
- Single-window e-logistics market
- Increased competitiveness of MSMEs
- Reduced logistics costs as a % of GDP
- Logistics Efficiency Enhancement Programme (LEEP): Aims to improve freight transport efficiency by focusing on:
- Associated cost reduction
- Reduced transportation time
- Improved logistics practices (goods transfer, tracking) through infrastructure and process interventions
Way Ahead:
- Liquidity measures: Deeper interest subvention and extension of interest equalization scheme.
- Addressing geopolitical challenges: Ensuring container availability, marine insurance, and rational freight charges.
- Sector needs: Easy & low-cost credit, marketing support, and conclusion of key Free Trade Agreements (FTAs).
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