India’s next Foreign Trade Policy (FTP) is expected to be rolled out in April 2022. During its re-engineering, there is a need to capture crucial elements to boost India’s exports in the new normal of the post- pandemic. It must be equipped to respond to extremely strong global competitiveness, accentuated by ever-increasing digitization and new technologies in all segments and growing WTO restrictions on incentives. The quality and efficiency of India’s logistics services play a vital role in creating cost and time efficiencies, global competitiveness and growth of the economy by supporting the building blocks of manufacturing and trade and international trade, aided by technological tools. India’s logistics industry is expected to grow at a compound annual growth rate of over 10%, growing from $200 billion at the start of 2020 to at least $320 billion in 2025. E-commerce, which is so vital to provide global access to the products and services of our MSMEs across the country, and indeed should have a separate chapter in the new FTP, also critically depends on logistical efficiency in the integrated global value chain, contributing to overall competitiveness in the process matrix.
The continued growth of world trade depends on the effectiveness of trade support structures such as logistics services. In 2018, India ranks 44th in the Logistics Performance Index. India’s logistics industry as it currently stands has constraints on shipping and ports, loading/unloading and turnaround times, quality testing and certification facilities, ‘smaller number of formal transport companies using efficient technologies, availability of storage and warehousing at strategic locations, lack of packaging standardization leading to delays in handling and retrieval, bottlenecks in the connectivity with the railway wagons, an optimal coordination and collaboration between the functions of storage and transport. According to a QBIS report, Nhava Sheva Port alone can help importers save 17 billion rupees ($228 million) through digitization, and nationwide digitization can help save 65 billion rupees. rupees ($872 million) per year. It has to be said to the government’s credit though that infrastructure and such things have improved very rapidly in the recent past with great expectations for the future!
There is an unavoidable and extensive use of trade policy instruments such as tariffs, export restrictions, export taxes, anti-dumping duties and import licensing, much of which, however, needs to be facilitated on the operational plan through digitization, artificial intelligence and new technologies. Tariffs, restrictions and strict regulatory compliance add to the cholesterol of India’s trade policy, adding to avoidable costs and delays.
The outbreak of COVID-19 has only exacerbated these cracks in India’s logistics system. Along with shutdowns and mobility restrictions, the pandemic has impacted key warehousing and transportation functions, highlighting India’s overloaded highways and severe shortage of skilled labour.
The disruption of the COVID-19 crisis illustrates the need for structural reforms to make logistics more formal and streamlined. The pandemic has made the shift to a more formal, technologically capable logistics framework a necessity for small business survival, not just a competitive advantage. But most of the small, informal logistics players in the country’s supply chains are not equipped for this rapid technological change. Emphasis should also be placed on skills
upgrading the workforce in the logistics sector, especially in critical segments and strategic geographic locations. Adapting innovations such as AI and cloud computing can add efficiency and value at every stage of the logistics value chain.
India’s logistics sector provides livelihoods to more than 22 million people and increasing the scope of distribution and production activities has the potential to unlock many job opportunities in logistics and transport in India. general. Overcoming the problem of capacity allocation and distribution of facilities across regions is imperative to help the Indian economy chart a faster post-COVID path to efficiency.
E-commerce operations also bring economic development and fuel the growth of ancillary businesses such as packaging, transportation, logistics, and hospitality across the country. Big players like Amazon and Walmart-Flipkart, with their commitments to accelerating exports from India, using their logistics at both ends, can help MSMEs, artisans and craftsmen across Bharat to access global markets. There could be specific links to programs such as “One District, One Product” in the policy matrix.
The government should consider a holistic approach that reflects the global transformation of trade through digitalization while working to reduce compliances to improve freight efficiency and reduce logistics costs. A more conducive investment climate with better logistics can lead to a 10% decrease in indirect logistics costs, leading to 5-8% growth in Indian exports.
FTP must take into account national and international complexities and include a sustainable policy regime where digital tools can be leveraged to add value at every stage of the logistics value chain. A thriving logistics industry can not only bring more jobs, but also economic prosperity. Therefore, any arrangements made must also take into account small logistics companies and the associated rules, procedures and incentives for exports and imports with other initiatives such as Make in India, Digital India and Skill India. The upcoming FTP is expected to rapidly roll out the policy so that it can help Indian exporters regain their competitive edge in global markets. Weak logistics infrastructure and business processes can be a major barrier to integrating global trade. Therefore, it is crucial to develop specific action plans aimed at diversifying Indian exports and strengthening the governance framework for India’s compatibility with the global trading system. The upcoming CTF can play a vital role in making India a competitive exporter, mobilizing international investment to boost India’s trade competitiveness and pave the way for India to become a logistics hub.
The opinions expressed above are those of the author.
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