National Logistics Policy in India
To boost the ease of doing business and enhance the liveability quotient, Prime Minister Narendra Modi launched the National Logistics Policy (NLP) on 17th September 2022 in Vigyan Bhawan, New Delhi. The policy aims to lower the cost of logistics from the existing 13-14% and lead it to par with other developed countries. This will increase the competitiveness of Indian products in both the Indian home market and the international market. Moreover, the reduced cost will also increase efficiency efforts cutting across all sectors of the economy, which encourages value addition and enterprise.
National Logistics Policy revitalises many fields. Today, India is preparing the ground before introducing any policy; only then can a policy be implemented successfully. NLP took eight years to develop. Policy shifts and major decisions are being made to quick last-mile delivery, ending transport-related issues, saving manufacturers time and money, and preventing wasting agricultural products. Coordination improvements will boost sector speed, value creation, and entrepreneurship.
The National Logistics policy is a comprehensive effort to address cost and inefficiency by issues lying down an overarching interdisciplinary, cross-sectoral, and multi-jurisdictional framework for the developing entire logistics ecosystem. The goal of this policy is to make the logistics industry more efficient and lower its costs. The strategy aims to boost economic growth, provide employment opportunities, and make Indian products more competitive in the global market.
The goal of the Prime Minister is to create a modern infrastructure of a world-class standard by including all relevant stakeholders in the process of holistic planning and implementation. This will allow for greater efficiency and synergy during the project's execution. In this regard, the Prime Minister's initiative, PM GatiShakti, also known as the National Master Plan for multi-modal connectivity, which was introduced in the previous year, was an essential first step. Establishing the National Logistics Policy will support the PM GatiShakti initiative and complementarity.
The backbone of India's international trade is logistics, which aids in the diversification of not only the country's exports but also of products manufactured in the countries. The NLP thus aims to promote seamless movement of goods and enhances the competitiveness of Indian industries. Also, it seeks to reduce the logistics cost from 16 per cent of Gross Domestic Product (GDP) to a global average of 8 per cent by 2030. Further, as per the estimates, the worth of the Indian logistics market will be around $ 215 Bn in the next two years compared to $ 160 Bn. Investment Information and Credit Rating Agency of India Limited (ICRA) estimates that the sector will develop at a Compound Annual Growth Rate (CAGR) of 10.5 per cent through 2025 after growing at a CAGR of 7.8 per cent over the past five years. This sector employs more than 22 million people in India, which through skill development is expected to grow at the rate of 5 per cent in 5 years. The four significant steps to be undertaken for NLP include:
- Integration of Digital System (IDS): There will be digital integration of different systems of seven various departments (like road transport, railways, aviation, commerce ministries and foreign trade)
- Unified Logistics Interface Platform (ULIP): This ensures shorter and smoother cargo movement and enables the exchange of information confidentially on a real-time basis. This National Industrial Corridor Development Corporation (NICDC) Logistics Data Bank Project has been leveraged.
- Ease of Logistics (ELOG): will enable and ensure the ease of logistics business through transparency and accessibility
- System Improvement Group: will monitor all logistics-related projects regularly
The programme aims to ensure that logistical problems are minimized, exports increase significantly, and small businesses and the people who work in them gain profit. All this will augment the economy in various ways like employment generation, inter-state, and international exchange of goods. This policy move will bring India closer to becoming a global manufacturing powerhouse and pave its way to becoming a logistics hub.
The NLP's transformational capacities further increase when combined with previous connectivity and infrastructure improvement programs like:
- The Gati Shakti Programme's goal is to implement infrastructure connectivity, including roadways and railways projects across the nation, in a coordinated manner.
- The Sagarmala - envisions using the potential of the coastline and waterways to reduce the amount of infrastructure needed to reach their targets.
- The Bharatmala - focuses on reducing critical infrastructure gaps to increase the effectiveness of road traffic circulation across the nation.
The above core initiatives will help create a single window e-marketplace as a one-stop shop for relevant knowledge and information exchange that can ease logistics facilitation matters in the country.
There have been some noteworthy changes in the Indian ports already, as the capacity of Indian ports has increased significantly, and the average turnaround time for cargo ships has decreased by 18 hours. Forty air cargo ports have been built to increase exports, and thirty airports have been equipped with cold storage facilities. There will soon be 35 multi-modal hubs nationwide, enabling seamless freight movement. The development of waterways is a direct response to the pressing need for environmentally friendly and cost-effective transportation alternatives.
India's latest policy of Comprehensive Logistics Action Plan (CLAP), provides details and a push to the NLP's specific targets. It focuses on reducing India's logistics cost to a level comparable to global benchmarks by 2030. It thus aims to be among the top 25 countries by 2030 in the Logistics Performance Index (LPI) (according to the World Bank Logistics Index of 2018, India is ranked 44th in logistics cost).
Further, better technology has been adopted to strengthen the logistics sector. For example, paperless export-import trade operations have been made possible by the e-sanchit portal, and faceless evaluation in customs has been implemented. E-way bills and FASTag are also frequently used on roads to boost the effectiveness of the logistics industry. Also, a unified tax system like Goods and Services Tax (GST) enables ease in issues related to the logistics sector.
The industry observers' are further sure that NLP will bring a brand-new transformative approach to the country's logistics ecosystem, increasing the efficiency across supply chains. Arindam Guha, Partner, Government and Public Services Leader, Deloitte India, anticipates that the new programme will enable a modal shift in logistics away from the current over-reliance on roads (over 60 per cent share currently versus 25 per cent globally) and toward railways (30 per cent currently versus around 60 per cent globally) and waterways, which presently have a 5 per cent share in the modal mix.
India aims to become $ 5 Tn economy by 2024-25. For this, connectivity and robust infrastructure will become crucial points, and the NLP provides the required boost for the sector to this effect. This policy will augment warehousing capacity and enable faster communication to take products closer to their consumption points. NLP will also bring new energy to all other sectors. As logistics develop, manufacturing, production, automobile, and other industries like warehousing and infrastructure development will also develop. This will spur the growth of commercial real estate and industrial parks.
NLP will thus promote the facilitation of a unified regulatory environment and institutional framework governing the sector that will set up multi-modal logistics parks (MMLPs) as key markets. This will ensure faster first and last-mile connectivity, and as logistics improve, the export-import, manufacturing, cold storage, and industries will also grow.
This article has been co-authored by Bhakti Jain and Ishita Dhar.