Operations
Since independence only 20 per cent capacity has been added to the railway network but the traffic has increased ten times. The case of road infrastructure is no different: national high ways account for 2 per cent of the roads but transport 40 per cent of the freight tonnage. 57 % percent of the total freight is still transported on the road network. The main reason for heavy dependence on mode of road transport is the lack of rail sys
A V S Srikanth NITIE Logistics as a lever of economic growth
It is important for the Country’s today to look at alternative ways to be effective in the dynamic business scenario and global competition. The logistics/ supply chain management is one such area to make the improvisation. A lowering of logistics costs by 1 percent of GDP translates to savings of over 7.5 billion dollars. In spite of the huge potential for growth, the sector didn’t keep pace with the India’s wider economy and threat to the future competitiveness. It is estimated that a whopping $ 65 billion is lost every year on account of inefficient supply chain system in India. The logistics costs India are about 12-13 per cent of the GDP as compared to 7- 8 percent in the developed countries. Hence the country loses around 4.3 per cent of GDP. This can be attributed to the lack of adequate infrastructure and supporting mechanism in the country. For example it is estimated that India burns 2.5 billion dollars worth of fuel on account of trucks standing idle on state check posts.
-tem responding to the needs of the industry. Logistics parks, warehousing and other support infrastructure are also at an early development stage. The transportation costs comparison by mode with the U.S demonstrates that India’s logistics infrastructure is quite subdued. For instance, rail and coastal shipping costs in India are approximately 70 per cent higher than those in U.S. Likewise, road costs in India are higher by about 30 per cent. This not only results in higher prices and lower competitiveness, but also hampers economic growth.
Projections for the future It is estimated that by 2025 India will be one of the world’s five largest economies. India has formulated some of the initiatives like National manufacturing policy which aims to accelerate the growth in manufacturing sector. This is also aided by the options being considered by the players in China who want to diversify into other countries for market access and generating facilities across all the important emerging markets. The sector is expected to grow at a CAGR of 26 per cent during 2011-13 on a very low base.
Bottlenecks The logistics spend in India is significantly high due to the diverse geographical spread, inadequate infrastructure, complex tax regime, and insufficient storage systems.
iNM - Magazine Vol. 4
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