News Excerpt:

Logistics has been talked about for a long time, and India has also focused on improving performance. We are now getting some precise data on measurement and quantification.

India’s performance in the Logistics Performance Index (LPI): 

• LPI focuses on trade logistics. 
• This is based on six heads of customs, infrastructure, international shipments, logistics competence, tracking and tracing, and timeliness.
• In the 2023 LPI, India is ranked 38 out of 139 countries. In 2014, India was ranked 54.
• India’s logistics performance has improved.
• The goal has been clearly articulated in 2022: Targets for achieving the vision of the National Logistics Policy are to -
• Reduce the cost of logistics in India to be comparable to global benchmarks by 2030; 
• Improve the Logistics Performance Index ranking - endeavour is to be among the top 25 countries by 2030;
• Create data-driven decision support mechanism for an efficient logistics ecosystem.”

Logistics cost in India:

• As per Economic Survey 2022-23, logistics costs in India have been in the range of 14-18% of GDP against the global benchmark of 8 per cent.
• In 2018, a port logistics report by Dun and Bradstreet (D&B) found that the cost of doing business at seaports was around 15-16 per cent of the consignment value. 
• As per CII-Arthur D Little report, 2020 on India’s supply chain - logistics costs in the Indian supply chain amount to almost USD 400 billion, or 14% of GDP.
• The logistics cost is 8-10% of GDP in the US and Europe and 9% in China. 
• The global average is nearly 8% of GDP, revealing a competitiveness gap of USD 180 billion for India. 
• Other South-Asian countries, such as Thailand and Vietnam, have high logistics costs of 14 and 16-17 percent of GDP, respectively.

National Council of Applied Economic Research (NCAER) report 2023 on logistics cost in India:

• This is precise in its methodology and estimation. 
• In the context of India, there are no official estimates for logistics costs as a percentage of GDP. 
• However, for private sector and academic institutions, India has high logistics costs.
• NCAER cites three - Armstrong and Associates (2017), an estimate of 13% of GDP; CII (2015), an estimate of 10.9% of GVA; and NCAER (2019), an estimate of 8.9% of GVA. 
• Clearly, there are variations in what is being measured and how. 
• This new NCAER report uses supply and use tables. 
• In 2021-22, logistics costs had an estimated range of between 7.8 and 8.9%. 
• In 2014-15, they had an estimated range of 8.3% and 9.4%. 
• There has been a decline over time (with a transient increase in 2017-18 and 2018-19). 
• Two points emerge: 
• First, logistics costs aren’t as bad as they are often made out to be,
• Second, they have declined over time (also evident from LPI).

State-wise logistics cost performance:

• According to the Commerce Ministry’s LEADS (Logistics Ease Across Different States) report, 2023 - 
  • States are divided into four groups - coastal, landlocked, north-east and UTs.
  • States that do well are called achievers. 
  • States that are middling are called fast movers. 
  • States that are sub-par are called aspirers. 

• Performance of coastal states:

• 75% of export cargo is estimated to originate from them. 
• Among coastal states, Andhra Pradesh, Gujarat, Karnataka and Tamil Nadu are doing well. 
• The ones that lag are Goa, Odisha and West Bengal. 
• Most states, including Goa and Odisha, have a state-level logistics policy. West Bengal, bottom of the pecking order in the coastal category, doesn’t have one.

Conclusion:

While logistics performance has increased overall in India, there remain differences between states. Precise data, such as that found in the NCAER paper, provides a starting point for understanding and quantifying logistics costs, contradicting the concept that they are as high as often assumed.