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A chance to bridge India's competitiveness gap of $80 billion.

Date: 11-01-2021
Subject: A chance to bridge India's competitiveness gap of $80 billion
The economy is gradually reviving and the economic indicators appear to be getting back in shape. As the government has announced that the Budget 2021-22 will focus on fuelling growth, the logistics industry will undoubtedly play a critical role in putting the economy firmly on the road to recovery. In the post-pandemic era, the government aims to create a launch-pad with the 2021-22 budget for realising a massive growth spectrum in the next 4-5 years. So, to achieve that target and fast-track growth, the government must focus on boosting the logistics industry.

Topping the budget wish-list is driving down the logistics cost. Higher logistics cost makes exports across sectors uncompetitive in the international market. According to a report by Arthur D. Little and the Confederation of India Industry (CII), higher logistics cost has led to a competitiveness gap of $80 billion for India and the gap is expected to go up to $500 billion by 2030. The government has rightly acknowledged the fact that there is an urgent need to reduce the logistics cost from the present level of 14 per cent to less than 10 per cent of GDP by 2022. The need of the hour is infrastructure development. The adoption of advanced technologies and digitation of systems, processes and operations will enhance time and cost efficiency of the logistics service providers and the enhanced efficiency will positively impact export competitiveness of our country. The logistics industry will be keenly following the budget for a roadmap to reduce logistics cost so that it can play a more effective role in the country's GDP growth.

The government must increase spend on developing logistics infrastructure. In the post-pandemic world, e-commerce has emerged as an integral part of our day-to-day existence and the e-commerce boom has reshaped the logistics industry as well, as the e-commerce deliveries are essentially time-sensitive.

Therefore, to help e-commerce sector as well as logistics sector to grow, the government must invest in further improving road infrastructure. In this world of hyper-connectivity, the logistics movement needs to be seamless and a developed transportation eco-system facilitates that seamless connectivity. The government must also focus on enhancing infrastructure around port. Congestion around port has always been a key pain-point which the government must proactively address to unclog growth.

Another key aspect that the government must address in the upcoming budget is to facilitate digital transformation and automation. The digitisation and automation will alter the logistics landscape and make last-mile delivery solutions far more effective. The logistics industry has learnt its lesson from the pandemic experience and the logistics players are now working towards cutting down human involvement in various phases. The budget should propose tax reliefs to encourage logistics companies to invest in technology advancement which will improve operational efficiency and cost-efficiency.

Inland waterways still remain underutilised. The government must come out with a robust policy framework to develop inland waterways. Moreover, an emphasis on providing tax subsidies and relaxing indirect taxes for warehouse leasing will help in expanding the business outreach and growth of warehouse players and 3PL service providers.

All in all, Budget 2021 will have a crucial role to play in envisioning the future course for the sector.


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