Answer:

Logistics and transportation sector is considered as backbone of the economy because it provides flow of goods efficiently on which success of other commercial sectors depend. Therefore, the logistics infrastructure has gained a lot of attention both from business industry as well as policy makers.

India’s logistics and transport sector is fraught with several issues and challenges. It has

largely developed in silos resulting in overly complex regulation and administrative

procedures. In addition, there are missing modal links and the modal mix is inefficient. For instance, transport by rail and inland waterways is far more cost and time efficient than transport by roads and should account for high proportions of the freight flow. However, while road freight accounts for 54% and railways 33%, just 6% of freight transported in India is carried by coastal shipping and inland waterways.

Consequently, India needs to build a new and robust logistics network to allow inputs, components and finished goods to move across the country seamlessly. An effective multi-modal logistics and transport sector will make our economy more competitive due to the following reasons:

♤ Reduces cost: Efficient transportation and logistics reduce transport time and costs. Moreover, they reduce cost of production by minimizing the need for large inventories. This means less capital required for warehouses, insurance and the like.

♤ Creates markets for other goods: The conventional view of demand in the logistics sector states that it is derived demand. However, growth in transport and logistics enterprises can create markets for other goods.

♤ Enhances Inter-state trade: Reducing friction via improved logistics could boost inter-state trade flows in India that already stand at a healthy 54% of GDP.

♤ Keeps pace with demand for transport: The demand for transport has accelerated manifold since the 1990’s. It is important to keep pace with it. Otherwise, it could thwart the manufacturing push and attempts to boost farmer earnings to the benefits of urban agglomeration economies.

♤ Complements GST: A robust multi modal logistics network will allow companies to restructure their supply chains once the domestic market is truly integrated. This would complement GST implementation.

♤ Lastly, efficient logistics networks can reduce divergence in regional growth.

Realising its importance, the government has put forth its plans to draw up and implement a specific programme for development of multi-modal logistics parks, together with multi-modal transport facilities. This programme aims to switch to a hub- and-spoke model from India’s current point-to-point logistics model. It entails setting up 35 multi-modal logistics parks at a cost of Rs 50,000 crore, developing 50 economic corridors and inviting investment from the states and private sector. Most importantly, it envisages an integrated approach that will utilize railways, highways, inland waterways and airports to create a transportation grid that covers the country.