Exercise underway to develop an index with an aim to cut logistics costs to 10% from 14%.
Updated: Oct 08, 2019, 09.26 AM IST
will soon have its own index to estimate the costs of logistics in its top nine export sectors including agriculture, leather, apparel and, gems and jewellery. The department of commerce has begun an exercise to develop sector-specific indices to estimate the logistics costs and bring them down to 10% of thegross domestic product
(GDP) from 14% at present as they are higher than those in developed countries.
The government also aims to break into the list of top 30 countries in the World Bank Logistics Performance Index which ranked India 44 in 2018 from 54 in 2014. “Internationally, no one has made sector-specific indices to estimate logistics costs. We have taken the top exporting sectors and will move on to domestic trade later,” said Manoj Pant, director, Indian Institute of Foreign Trade (IIFT). The institute, an autonomous body under the ministry of commerce and industry, is developing the index which is likely to be released early next year.
Data collection for the index started three months ago and is being done through perception based surveys through the respective export promotion councils.
“We are getting to know about their problems such as biggest constraints in transportation and warehousing,” Pant said.
The index would also look at the logistics issues of electronics, marine, chemical and engineering goods and serve as a common measure of logistics performance for various industries in India.
At 14%, logistics cost in India is much higher than Japan’s 11% and the US’ 9-10%. Of this, transportation and warehousing make the bulk.
“While movement of goods is a major problem in most exports, temperature-controlled facilities are key for agricultural goods and pharmaceuticals. So, by and large, the issues are same for most exports,” said Ajay Sahai, director general, Federation of Indian Export Organisations.
Globally, coastal transportation is the most favoured way followed by railways and then roads. But the trend is reverse in India where nearly 60% of the cargo is moved by road, 32% by rail and rest by the coastal shipping, airways and inland waterways.
The index will help identify the cost efficient way of transporting inputs and finished goods.
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