Logistics cost and exports discussed at think tank ICRIER’s report launch event

The launch of ICRIER report on Express Delivery Services was organised yesterday in the Capital, and was attended by the Minister of Commerce and Industry – Piyush Goyal – along with other dignitaries. The report sheds light on the potential of the express delivery services business, in which India has a 2% share of the global market, and also suggests a host of measures to strengthen the segment. Apart from a single rate of GST – something that the government is unlikely to agree to in near future – the ICRIER report has made a case for the customs to implement voluntary disclosure norms.

Dr. Rakesh Mohan (Member, Economic Advisory Council to the Prime Minister (EAC-PM) and President, and the Former Governor of the RBI) delivered the Special Address at the event, during which he talked substantially about India’s logistics cost.

Dr. Mohan’s address took a long term perspective on India’s logistics sector, during which he also questioned the calculations around the 14% logistics cost in India, which was even mentioned in the Economic Survey. Mohan pointed out that in 2019, NCAER had estimated India’s logistics cost at 8.8% of GDP. Comparing the share of manufacturing in GDP with the logistics cost, the distinguished economist said that it is dubious for them to stand so close to each other at 17% and 14% respectively.

“It seems to be generally accepted that India’s logistics costs are significantly higher than global benchmarks. I have tried to look into this, but I can never find what is the basis of this data… this report (CRIER report) repeats the often used number of India’s logistics costs being 14%of GDP,”

Dr. Rakesh Mohan, Former Governor of the RBI

He also said that while the Economic Survey data, which is mostly accepted and recognised in India, states the logistics cost to be somewhere between 14-18% of GDP, another report by the National Council of Applied Economic Research (NCAER) to the Logistics Division (MoCI) in 2019 calculated it to be around 8.8% i.e. well within the global levels. “But one never sees the mention of this report. We keep repeating the Economic Survey data which came after the NCAER 2017-18 report,” said Mohan.

The Minister, while addressing those attending the launch, said that there was a need to cut down on India’s logistics costs and the government is doing its part in doing so, by focusing on scale, efficiency and technology – making a conscious effort to change the mindset of looking at things from the old perspective.

“Going by the strong foundation which the government is building in terms of high expenditure for developing modern infrastructure, internationalisation of trade , free trade agreements and growth in exports of goods and services, the economy size may reach USD 35-40 trillion by 2047.”

Piyush Goyal, Minister of Commerce and Industry

Goyal gave an insight into the government’s initiatives in the direction of digital connectivity and infrastructure development (ULIP and DFCs). He also said that the government’s efforts are expected to take India’s overall exports in 2022-23 to around USD 765 billion.

Express delivery services is yet to come to terms with the huge potential India holds and the scale, efficiency, and building blocks through technology must be utilized to bring down the cost in logistics, he added.

The minister further stated that the Prime Minister’s vision for India is big and bold, and the entire world is looking up to India with hope and confidence that the country can deliver.

The country’s goods exports touched USD 447 billion till the last count for FY22 fiscal year against USD 422 billion in FY21. Since the Ministry is in the process of collating the data, which comes at a lag of 15 days, the final export and import data for FY22 would be released by the mid of April.

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