Logistics Cost in India: NCAER Estimates Range from 7.8% to 8.9% of GDP in 2021-22

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The logistics sector plays a pivotal role in facilitating trade, enhancing competitiveness, and driving economic growth. Recognizing its significance, the Government of India has undertaken a comprehensive study to calculate the logistics cost in the country. The National Council of Applied Economic Research (NCAER), a renowned economic think-tank, has released quick estimates of India's logistics cost for the year 2021-22, shedding light on key trends and challenges.

Key Findings of the Report

According to the NCAER report, India's logistics cost ranged from 7.8% to 8.9% of the country's Gross Domestic Product (GDP) in 2021-22. This indicates a significant improvement compared to previous years, with logistics costs gradually declining from 8.8% - 10% of GDP in 2012-13.

The report highlights the government's commitment to reducing logistics costs and enhancing the competitiveness of Indian industries. The release of a national logistics policy and ongoing efforts to improve India's ranking in the World Bank's Logistics Performance Index (LPI) from 38th to under 25th position demonstrate the government's dedication to this cause.

Data-Driven Planning and Policy-Making

The NCAER report emphasizes the importance of credible data in logistics cost estimation. The government's investment in both physical and digital infrastructure is creating an enabling environment for data collection and analysis. This will facilitate data-based planning and policy-making, ensuring more effective and targeted interventions in the logistics sector.

Challenges and Future Refinements

The report acknowledges the challenges in calculating logistics costs due to the involvement of various components such as transportation, warehousing, insurance, information flow, administration, and management. The NCAER estimates are based on quick estimates and will be further refined using more granular data in the future.

Significance of Logistics Cost Calculation

The calculation of logistics cost is crucial as it has a direct impact on the country's manufacturing sector, export competitiveness, and global positioning. The lack of credible data in the public domain has led to non-official estimates that lack credibility. Therefore, the development of a scientific logistics cost calculation framework is essential to ensure inclusivity and statistical accuracy.

Industry Perspective

The industry chamber CII welcomed the report, stating that it provides a clear quantification of logistics costs and identifies the components that contribute to these costs. The report's findings align with industry observations, indicating a reduction in logistics costs from 8.8% - 10% of GDP in 2012-13 to 7.8% - 8.9% of GDP in 2021-22.

The NCAER report on India's logistics cost provides valuable insights into the current state and trends in the logistics sector. The government's efforts to reduce logistics costs and improve the country's LPI ranking are commendable. By adopting a data-driven approach and developing a comprehensive framework for logistics cost estimation, India can enhance its competitiveness and foster economic growth.