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1% cost cut in logistics would add $10 billion to India’s GDP

1% cost cut in logistics would add $10 billion to India’s GDP

Image by: Ashwin John – Flickr

Logistical inefficiencies bottleneck internal movement of goods and compound costs of international trade thus robbing potential revenues from both domestic and global markets. Logistics costs account for 14% of Indian GDP, compared with 10% in China and just 8% in the United States. The high cost of getting goods to market makes Indian products less competitive on the international stage. Although India’s score on trading across national borders increased from 57.6 to 58.5 in 2018, export and import costs remained unchanged at USD 91.9 and USD 134.8, respectively.

Anil Khaitan, President, PHD Chamber of Commerce and Industry noted that every 1% reduction in logistics costs would add USD 10 billion or INR 65,000 crores to India’s GDP.

He added the nation could jump-start its move towards an organised and efficient logistics sector by adding highly effective and connected:

  • Transport services
  • Port facilities
  • Communications
  • Energy
  • Financial services and
  • Business legislations

Commenting on the importance of infrastructure Mr. Khaitan called for decentralisation of infrastructural projects sanctioned by the Trade Infrastructure for Export Scheme (TIES). The value of public-private-partnership projects declined precipitously by nearly 80% from Rs 53,248 crore in 2011-12 to Rs 12,400 crore in 2016-17, while the number of projects undertaken dropped from 52 to 9.  Mr. Khaitan suggested that streamlining projects will expedite them, soliciting more investments and improved trade returns.

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