QUE. What are the major challenges and constraints hindering the competitiveness of India’s logistics system? Discuss in detail the steps taken by the government to boost the country’s economic growth and competitiveness.

The logistics industry encompasses all types of supply chain activities, especially transportation, inventory management, information and customer service facilities. It not only determines the success of a country’s supply chain but also its global dominance. The logistics sector in India accounts for about 14.4% of the total GDP and provides employment to more than 22 million people. The Logistics Division of the Department of Commerce in India is entrusted with the responsibility of integrated development of this sector.

• Key challenges and constraints hindering India’s logistics competitiveness:

• India has the highest (around 65%) reliance on road for freight transport. This leads to traffic congestion, pollution and increased transport costs.

• Railways, despite being the most inefficient mode, have been underperforming. Indian Railways is losing ground due to infrastructure issues such as terminal infrastructure, maintenance of sheds and godowns, uncertainty in wagon supply, lack of perennial roads to reach railways, etc.

• Railways contribute significantly to the movement of goods like coal (44%), iron ore (13%), cement (10%), grains, fertilizers etc. The movement of small non-bulk items by rail is limited.

• Unpredictable long transit times, procedural delays, multi-modal handling, lack of end-to-end connectivity by rail are the major challenges facing the Indian logistics sector.

• Lack of experienced and skilled human resources with appropriate skills is a major concern with the growing size of the sector, its complex operations, multi-tasking.

• Transport companies mostly use godown facilities to store their goods and reach the customers, but these facilities are not free and steps are needed to reduce their tax and other costs.

• The sector in India is highly fragmented. A number of small and medium-sized service providers operate in different ways which reduces the optimum utilization of resources and increases the total cost.

• Lack of coordination between manufacturers, distributors and retailers leads to inefficiencies, delays and price hikes in supply chain management.

• Steps taken by the government to boost economic growth and competitiveness:

• National Logistics Policy: Its main objective is to boost the economic and corporate competitiveness of the nation by establishing an integrated, sustainable and affordable transport system. This policy aims to bring down logistics cost from 14% to 10% of GDP.

• National Logistics Act: It will help in providing a fixed logistics account number instead of a tedious registration process.

• Logistics Master Plan: An inter-ministerial committee will be used for its implementation. A local logistics strategy will be formulated according to the state.

• Construction of National Multimodal Facility and Warehouse

• Certified Logistics Professional Scheme will be launched under the National Logistics Workforce Strategy.

• PM Gati Shakti National Master Plan: Under this, a provision of Rs 2.4 lakh crore has been made for Indian Railways in the 2023 Budget.

• In addition, Bharatmala, Sagarmala, Dedicated Freight Corridor, Express Highway, GST E-Way Bill System etc. are being implemented.

The country’s transport capacity can be increased with the development of integrated logistics infrastructure through end-to-end connectivity including railways and roads.