IS THE REDUCTION OF THE LOGISTIC COST TO 14% A MISINTERPRETATION ?

Saying that India's logistics cost is significantly high, sitting at 14% of GDP, is as natural to someone who has been closely monitoring the supply chain business in India and its progress as breathing. Both domestically and internationally, the high cost of logistics and the Modi government's suite of attempts to reduce it to a single figure have been hot topics. But when one stops to think about it, free from any bias, it is not difficult to see that the Armstrong & Associates estimate of 14% of GDP is an exaggeration. This estimate was made using a model designed for industrialised nations. For many nations, Armstrong & Associates frequently calculates logistics costs as a share of GDP.


The model is based on observed data on input variables linked to the economy and infrastructure (available from the World Bank database) and output variables (logistics cost as a percentage of GDP) of certain developed countries. Usually, various methodologies can be used to estimate the output variables of industrialised nations. The aforementioned approach can be used to enter input factors for any country to calculate its estimated logistics cost as a percentage of GDP.

Waterways are our top priority, followed by railroads, roads, and finally aircraft. Lowering logistical costs will aid in creating jobs in the nation. The cost of logistics in India is 16% of the GDP, which is quite expensive, and it is 10% in China and over 8% in the US and Europe.

It is unconfirmed that India's logistics costs are in the double digits. It can be used by logistics organisations for their lobbying efforts. The National Logistics Policy's adoption is expected to lessen the variability in consignment transit time, which is more significant from a business planning perspective.

The idea, according to officials, is to transport freight straight from production centres to consuming centres as well as from production centres to terminals from where the items can be exported out.

Waterways are our top priority, followed by railroads, roads, and finally aircraft. Lowering logistical costs will aid in creating jobs in the nation.

The government's actions will boost the logistics industry's development. Increased efficiency in the movement and storage of goods across the nation will result from integration in the form of a multimodal network of transportation and warehousing. The government wants to improve the current system by putting a strong emphasis on digital technology. This will result in quicker, better communication with fewer errors, which will be extremely beneficial to the sector. The plan contains a robust monitoring system with recurring audits to verify the application of policies and the necessary remedial actions.

Conclusion

The country's logistics sector may move on with a transformative strategy thanks to the major policy vision. The Gati Shakti Program, the Sagarmala and Bharatmala (waterways and highways) initiatives, the Dedicated Freight Corridors, etc. are just a few examples of how the NLP may be ground-breaking. The policy intends to lessen the existing over-dependence on roads with over 60% compared to 25% internationally and bring about a modal shift in logistics. India is only 30% dependent on railways, compared to 60% worldwide.

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