Contact Your Financial Adviser MONEY MAKING MC
05 July 2016
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| MAKE IN INDIA(The Total Investment & Insurance Solutions) |
Logistics forms the backbone of domestic and
international trade in any economy and is a critical factor for
competitiveness. Besides providing employment and movement of goods, an efficient
logistical network enables increases in the speed of doing business.
The Total Investment &
Insurance Solutions
A pertinent question is how does one measure the
logistics performance of a country and compare it with that of other economies?
A recent biannual report of the World Bank throws light on this. However, it
must be noted that the performance on Logistics Performance Index (LPI) is a
measure of performance on international supply chains and does not capture the
reality within a domestic setting. For that, the domestic LPI scores are done
in the same 'Connecting to Compete 2016' report.
The international LPI is based on an assessment of
performance along six key indicators -- some on the input side and the others
on the outcome side of the supply chain service delivery. These pertain to
border control agencies, infrastructure and services quality on the input side.
On the outcome side are competitively-priced international shipments, tracking
and tracing and timeliness. The Total Investment & Insurance
Solutions
The data is based on feedback from logistics
professionals on the ground.
In the present edition of the index, India's performance
is by far the best since 2007, with the country improving to 35. In 2014, India
was ranked 54 and so the jump this time around is a tremendous 19 ranks. With
this, India is one of the best-performing economies relative to the average
income level of its people. The Total Investment & Insurance
Solutions
So far the World Bank has put out five editions of the
report since its inception in 2007 with the most recently being released in
June 2016. There are three interesting insights from the report and associated
data sets that merit attention.
First, it is interesting to note that the top 10 ranks on
the index are occupied by the high-income economies and BRICS economies see
huge dispersion in ranks and scores. Germany has emerged as the best country
with an LPI score of 4.23 and Luxembourg is second with 4.22. The Total Investment &
Insurance Solutions
An interesting measure, which is the percentage of the
highest performer, is also mentioned. India, which has a score of 3.42, is thus
performing at a level of roughly three fourth's of Germany's. Within the BRICS
economies, India is placed below South Africa (20) and China (27), while it is
placed above Brazil (55) and Russia (99).
Second, India's performance has seen a rise along key
dimensions like customs (up 27 ranks from 2014) and tracking and tracing (up 24
ranks from 2014). It has shown modest improvements in international shipping
(up five ranks from 2014) and timeliness (up nine ranks from 2014). However, it
is worth noting that India has moved up since 2014 in all key six indicators
used to compute international LPI. This shows that despite the trade shrinkage
due to prevailing international conditions, Indian logistics providers are
seeing improvements in customs procedures, tracking of shipments and improvements
in infrastructure within the sector. The Total Investment &
Insurance Solutions
Third, the domestic LPI offers rich insights on how a
country is perceived by its logistics providers. This has two key dimensions
namely -- environment and institutions and performance. In the first aspect, an
astounding 63% of respondents feel port charges are high in India. Similarly,
on the quality of infrastructure, a massive 60% feel roads are low quality/very
low quality in India. For sources of delays, maritime transshipment is seen by
36% of the respondents as a major cause of delays.
On the performance aspect, India needs to improve its
performance on the percentage of shipments meeting quality criteria, which is
at 68.7%. These responses clearly lay out areas where governments at the
central and state levels have to improve over the long term.
In the years ahead, India should aim to improve
performance along key dimensions on the international as well as domestic LPI,
where it is relatively a laggard. These include focusing on the timeliness of
shipments and on removing infrastructural bottlenecks and improving the quality
of infrastructure. It has done well on this year's Index owing to the
commitment to improve connectivity with the world. Hopefully in the years
ahead, along with focusing on Make in India there is also a commitment to Move
in India.
The Total Investment &
Insurance Solutions
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