Powering up logistics post-GST
India’s logistics sector is expected to double in size to a $300 billion in the next five years. The Modi-led government has recognised the potential benefits of an improved logistics sector.
The passage of the GST Bill to facilitate the movement of goods between the States is a massive victory for the economy. India also recently ratified the WTO’s Trade Facilitation Agreement (TFA), which will expedite the movement of goods by easing customs regulations. Since 2014, India has actually moving closer to integrating itself with the global supply chains, jumping up 19 ranks to 35 on the World Bank’s Logistics Performance Index.
Taking it forward
In logistics, India is heading toward a win-win situation for itself and its trading partners. As the GST Council held its first meeting on September 22, I chaired a delegation of US logistics companies, as part of the US-India Business Council, to meet with key Indian officials.
There are three policy reforms that American logistics companies believe would enable India to achieve their goals: streamlining the GST further, implementing the WTO Trade Facilitation Agreement, and investing in infrastructure to support the e-commerce boom.
The passage of the GST is important, but a unified tax regime will only be advantageous when it can deliver a truly restriction-free flow of goods across interstate borders. Delays at State borders should be addressed by ensuring that customs and GST authorities share shipment information to improve transparency and expedite the movement of goods within India. Further, the industry should not be subjected to the (dual) administration of assessment and audit by the Centre and States.
It is also crucial that the Government implements its commitments under the WTO’s TFA and that particular attention be paid to those provisions with the greatest impact. Additionally, the launch of the Single Window Initiative — a one-stop shop for importers to clear shipments — is a transformational reform that can catapult India to the top of the global competitiveness scale. To meet the demand for express services, the same structure could be replicated for shipments imported via the courier, or express mode.
Finally, the establishment of a strong physical network of transportation infrastructure is indispensable to support India’s expected e-commerce boom. More and more packages are going from businesses directly to consumers and crossing international borders. Consumers only see the last mile but much of the action happens before that. It is the supply chain networks of the global logistics companies that deliver the world’s e-commerce.
The potential of the Indian economy is immense, but to reach that potential India must continue to reform its logistics sector and find ways to reduce logistics costs. Further GST reforms, trade facilitation and infrastructure investments are keys to delivering a more competitive and inclusive economy for India.
The writer is executive vice-president, marketing & communications, at FedEx Services