Govt aims to cut logistics costs by 5 percentage points over next five years: Piyush Goyal

Goyal also lauded the efforts of Uttar Pradesh for jumping 7 notches since the last report, the highest among all states, driven by policy initiatives, higher infrastructure spending in logistics, among others.

The government is aiming to trim India’s elevated logistics costs — long blamed for eroding the competitiveness of exporters — by as much as five percentage points over the next five years from the current 13-14% of gross domestic product (GDP), according to commerce and industry minister Piyush Goyal.

If the target is realised, it will catapult India to the league of developed nations where the logistics costs are around 8-10% of their GDP. The current logistics cost in India, however, is in sync with that in many other developing nations.

An earlier draft of the national logistics policy, firmed up about two years ago, had targeted to reduce such costs to 10% of GDP by 2022. However, as FE had reported in August, the government now intends to set a more ambitious target to bring down the cost to the global average of about 8% of GDP.

Releasing the Logistics Ease Across Different States (LEADS) report, 2021, on Monday, Goyal said the target can be achieved if states adopt the measures suggested in the LEADS report. These steps include framing of state-level logistics policies & master plans, use of single-window clearance system for logistics, establishment of grievance redressal mechanism and large-scale skilling in this sphere. States are important partners in the efforts to reduce the logistics costs, he stressed.

Gujarat led the pack of states again in the latest LEADS report, followed by Haryana and Punjab, and Delhi topped the list of Union territories. “Proactive policies, well-developed infrastructure and services driven by a responsive government have helped Gujarat to maintain its rank,” the report said.

Goyal also lauded the efforts of Uttar Pradesh for jumping 7 notches since the last report, the highest among all states, driven by policy initiatives, higher infrastructure spending in logistics, among others.

The renewed thrust on reducing logistics costs is important, as a 2016 HSBC report had suggested that domestic bottlenecks, including elevated logistics costs, accounted for a half of the slowdown in the country’s exports.

As per the Economic Survey 2017-18, a 10% decrease in indirect logistics cost could lead to an export growth of 5-8%. It had predicted that the Indian logistics market would be around $215 billion by 2020.

The commerce ministry will continuously engage all states and Union territories to help them improve the overall logistics ecosystem. Synergies flowing from such a coordinated approach will reduce logistics costs and which, in turn, will act as significant stimulants to the PM Gati Shakti National Master plan, Goyal said.