Union budget 2023: Prime Minister Narendra Modi launched the National Logistics Policy (NLP) last year to ensure fast last mile delivery, end transportation related challenges, save time and money of the manufacturers and avoid wastage of the agricultural products .
The need for an NLP was felt because logistics costs are high in India compared to other developed economies. It is imperative to reduce logistics costs in India to improve the competitiveness of Indian goods both in domestic and export markets.
Lower logistics costs improve efficiency by crossing different sectors of the economy, encouraging value addition and entrepreneurship.
The 2023 Union budget will be the first budget after the publication of the NLP. The industry expects a whole series of measures to encourage the sector to strengthen the infrastructure for logistics and to focus on sustainable logistics.
Kami Viswanathan, senior vice president, FedEx Express, Middle East Indian Subcontinent and Africa (MEISA) Operations, said that while NLP will be critical to developing the logistics and supply chain ecosystem, FedEx recommends a special focus on air freight.
“The development and expansion of airports to meet the burgeoning demand for air cargo capacity and digitalized systems to streamline the burgeoning cross-border shipments will be essential to ensure seamless cargo traffic in and out of India. A more efficient air express infrastructure will improve global competitiveness, ensure just-in-time deliveries and reinforce India’s ambition to become a $5 trillion economy by 2025,” Viswanathan said.
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Yogesh Patel, CFO, Mahindra Logistics also said that the announcement of NLP clearly indicates the direction to improve the efficiency and transparency of operations. Multiple interventions across the entire logistics ecosystem, which the policy defines, must be adequately financed by the budget so that their effects can become visible in the coming years.
“We expect the Union budget to promote initiatives to support the growth of our economy. The budget should continue to prioritize the improvement of logistics infrastructure across roads, warehouses and ports,” Patel added.
Experts also underlined that one of the focus areas for the budget could be increasing transparency and visibility, which can be achieved through the Unified Logistics Interface Platform once integrated into the system.
Viswanathan stressed that MSMEs are the growth engines of the Indian economy. Indian SMEs are prioritizing cross-border trade to thrive in the post-pandemic world. FedEx recommends allowing all categories of export and import shipments through express mode.
“We also recommend lifting value and weight restrictions for customs clearance under the courier regulations. This will further boost exports from India, especially for MSMEs engaged in cross-border e-commerce, and enhance India’s competitive advantage as a manufacturing hub,” added Viswanathan.
It is important to note that the e-commerce industry in India has grown rapidly in recent years and the pandemic has further fueled it.
The Indian e-commerce market is expected to reach $120 billion by 2026, according to a joint report by industry association FICCI and real estate consultancy Anarock.
It added that the rise of e-commerce will fuel the economic growth of the industry’s storage and logistics sector.
In addition, for budgetary reasons, FedEx recommended the introduction of a zero rate of goods and services tax for all international transportation services.
Most international GST/VAT laws and zero-rate international freight forwarding services. This would facilitate trade and align India with international tax practices and reduce logistics costs, Viswanathan added.
Patel expects the budget to prioritize strengthening infrastructure for logistics and related services and promoting connectivity initiatives across economic zones, creating a favorable environment for reducing logistics costs and times and boosting productivity and economics .
Viswanathan concluded that the budget should not only create a roadmap for sustainable growth in the logistics industry, but also encourage logistics players to adopt sustainable practices.
The NLP aims to reduce the cost of logistics in India to be comparable to global benchmarks by 2030, aims to be among the top 25 countries in the Logistics Performance Index ranking by 2030 and create a data-driven decision support mechanism for an efficient logistics ecosystem.
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