Logistics Performance Index (LPI)- 2023 WORLD BANK

19 January 2025 18:35

Customs:
The Chinese government has introduced a range of initiatives to simplify customs processes in logistics, concentrating on digitalization, simplification, and
alignment with international standards. Utilizing modern customs facilities, such as the "China International Trade Single Window" and pre-arrival
clearance methods, helps streamline paperwork and expedite customs clearance. To ease protocols and tax benefits, special zones like Free Trade Zones
(FTZs) and Comprehensive Bonded Zones are devised, while specialized cross-border e-commerce pathways allow quicker processing. Initiatives like the
Authorized Economic Operator (AEO) program offer compliant businesses quicker clearance as a reward, and risk management strategies focus
inspections to minimize delays for low-risk shipments. Adhering to global standards and trade agreements, has also contributed to harmonizing
procedures. Furthermore, reforms in policy, such as reduced tariffs and simplified licensing, improved efficiency, and lower costs, promoted China's
integration into international supply chains and enhanced its status as a logistics center.

India's Single Window Interface for Facilitating Trade (SWIFT) was launched to enhance and digitize customs clearance processes, thereby mitigating trade
obstacles and facilitating a better environment for business operations. The Customs’ SWIFT allows importers and exporters to submit a unified electronic
‘Integrated Declaration’ through the Indian Customs Electronic Commerce/Electronic Data Interchange (EC/EDI) Gateway, the ICEGATE portal. This
Integrated Declaration consolidates the information requirements of Customs, FSSAI, Plant Quarantine, Animal Quarantine, Drug Controller, Wild Life
Control Bureau, and the Textile Committee. It supersedes nine individual forms that were previously necessary for these six different agencies as well as
Customs. Along with implementing the Single Window, CBEC has also launched an Integrated Risk Management system for Partner Government Agencies
(PGAs), which ensures that consignments are selected for inspection and testing based on risk management principles rather than randomly selected by
the agencies. However, it has encountered several obstacles that have prevented it from reaching its full potential, such as limited collaboration among
agencies, operational inefficiencies, challenges with user adoption, incomplete digital processes, a shortage of skilled personnel, technical problems,
resistance to change, and lagging behind international standards in terms of speed and user-friendliness. To address these challenges, there is a need for
increased investment in infrastructure, skill development for users and officials, improved integration of agencies, and ongoing oversight to pinpoint and
resolve inefficiencies.

The upward trend is promising for India, as shown in the above snip from the UN Global Survey on Digital and Sustainable Trade Facilitation
https://www.untfsurvey.org/economy?id=IND&year=2023. Still, much work must be done to ease cross-border Paperless Trade, the Exchange of customs
declarations, the Exchange of Certificates of Origin, and the Exchange of Sanitary and Phyto-Sanitary certificates and the Pre-Arrival processing of Transit.
Schemes like Turant Customs and E-Sanchit needs to be expanded across verticals.

Infrastructure Logistics:
This is presumably the worst-performing matrix when it comes to the comparison of the Logistic Infrastructure of the two Nations. Despite efforts
being undertaken to integrate the transportation ecosystems, funding is directed towards very specific niches, and the good part is that transport
beyond roads is receiving much-needed Government intervention and focus. At present, nearly 13-14% of India's GDP is directed toward logistics
compared to 8-`10% of other developing nations, of which the prominent defaulters seem to be the cause of domination of Road transportation and
warehousing, which is highly fragmented and unorganized (to bring numbers into perspective, we see around 60-65% of transport happening on
road which is way higher than the average 20-27% for other nations.
This brings us to delve deep into why railways and waterways freight options are underutilized. Rail remains a cheaper and less polluting sector of
freight logistics, but due to unfavorable last-mile connectivity issues and unreliable timeliness, long-haul cargo/containers are better considered to
be transported by roads. Also, a very prominent case of cross-subsidization issue gives rise to unjust pricing between freight and passenger trains,
giving a higher tariff structure. Similarly, domestic waterways also face innumerable challenges- more unit cost due to typically high first and last-
mile costs, inflated by unavailable return load, higher voyage costs for specialized vessels, and high repositioning structure for domestic containers
bring it at a disadvantage.

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India's reliance on the Road segment is around 3 times that of China; an estimated nearly USD 45 Billion is lost each year due to inefficiencies in
India's Logistic Network, which will only worsen as a 2.5 times increase in goods traffic in the next decade.
On the contrary, China has modernized its Transport Infrastructure faster than any other nation in the face of time. New innovative strategies and
connectivity solutions have resulted in this. They have strategically lowered their GDP per sending on Logistics from 19% to an impressive 14.8% in
2018, increasing the logistic market valuation from 0.28 Trillion USD in 2001 to 1.73 Trillion USD by late 2018. India's Focus should be on a more
balanced modal network. An honest effort in reshaping the Network Structure (Rail Corridors-DFC, Inland Waterway corridors, and Last mile
connectivity), Support Network (Logistics Parks), a shifting focus on easing Tolling, and a Share of spend with most focus on water and rail to lead
the way ahead. A major budget restructuring is the need of the hour, as shown.

In layman's terms, a major chunk of the spending happens in Railway infrastructure with a focus on more Dedicated Freight corridor infrastructure,
and in the road sector, more strategically connecting the Expressway networks and the Last-Mile connectivity needs to be figured out. Roll out
schemes for coastal freight corridors and implement the PPP models to expedite and efficiently manage the corridors.
The Government's role lies in cutting the unit cost of economics, ensuring reliability of tariffs, innovating on container sizing, designing special
wagons for special loads, ensuring utilization of the DFCs already made, instilling the ability to run Time-Tabled freight trains, enabling reliability of
scheduling and delivery, apart from prioritizing rail and road connectivity to coastal berths and inland waterways in conjunction. The government
needs to account for the reports of ambitious claims of Sagarmala, Bharatmala, and DFC issues of Land acquisition and Political frictions between
State Governments and the Central Government must be resolved through a single window.

International Shipment:
For this, we must first dive deep into understanding the speed of trade and the magnitude and nature of delays, for which we have designed
parameters like Dwell time and Import Lead time. Dispersion in international freight transport dwell time is common, and India is no exception. So,
although the major time required to trade goods internationally is due to shipping, the greatest contribution to low reliability of delivery times is
due to the process in the importing Country. Dwell Time refers to the total time cargo spends at a port, from arriving to clearing and leaving the
premises. In this context, only a handful of Indian Ports boats have 2.5 to 5 days of Dwell time (JNPT and Mundra), while the others are lagging with
an average of 7-8 Days. Now, talking of Import Lead time(total time taken by goods to be delivered from the port of origin to the final destination,
including shipping, customs clearances, and last mile transportation, currently India stands at 8-16 days. Many factors like inefficient Customs
clearance procedures added by the congestion in ports, delays in Transportation linkages through roads and rails, and limited digital adoption.
China has an average of 4-7 days of Import Lead time, and some ports of China have less than 1 day of Dwell time (Shanghai Port).
India must look for opportunities to increase port capacity and work on Coastal freight inland connectivity on high priority. More focus on the Direct
Port Delivery System (DPD) must be expedited. https://www.jnport.gov.in/uploads/content_manager/DPD_Report_All_Terminals_-2024-25.pdf

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A CAGR must be ensured for DPD, and its implementation in other ports of India may be helpful. Also, several nearby strategic ports can be
developed connecting to the main inland by sea side development initiatives to decongest some important ports. Operational costs can be
minimized through subsidies for digital tools, bulk handling, and energy-efficient systems. Simplifying rules, standardizing procedures, and
introducing single-window licensing will ease compliance. Promoting the DPD system with awareness campaigns, financial incentives, and technical
support can encourage SMEs and MSMEs. Expanding port infrastructure, such as modern warehouses and container yards, will increase storage
capacity. Supporting the Accredited Client Program (ACP) with streamlined eligibility and rewards for compliance will boost voluntary participation,
accelerating India’s progress as a global logistics hub.

Logistic Competence and Quality:

India is grouped in 38th while China enjoys at 20th Group. Efficient management of information and data in technological solutions in both the
private and public sectors is important for higher quality of service. The importance of digitalization is gaining more traction and significance.
Managing big data can also lead to newer policy-making and similar avenues. The challenge for India is access to technology and the reliability of
basic infrastructure. Building the capacity and supporting technologies should remain the government's primary focus on policy agenda-making.
Lack of platformization of services is the leading cause of such poor performance, hindering us from achieving the scale at speed and other scaling
opportunities at large. Mastering To and Fro regions can be a good start for launching Pilot projects in this domain. Also, India lacks the concept of
setting 'Asset Right' through the lens of a more robust 3PL(Third Party Logistics) where some part of logistics are required to ignite players in quest
for network scale.
Some ways to in fact boost the Service quality lie with the three approaches:
• Line Haul (FTL/PTL) is a focused network where the right mix of asset ownership and service providers come together to give highly cost-
effective options. Load must achieve a critical maximum to ensure proper service utilization, resulting in low-cost logistics and backhaul
availability with minimum wait times.
• Last mile Delivery Network: As emphasized earlier, this ensures logistics streamlining in the last quarters of its journey.
• Hyper-local services: Ensured high utilization to mend skewed demand. Key success factors also include spreading to diverse cities.

This is where the government schemes of ULIP and NLP come into play:
• ULIP is a technology-driven platform integrating multiple digital systems across ministries and logistics stakeholders. It provides a single-
window interface for tracking, documentation, and regulatory compliance. ULIP aims to enhance transparency, reduce costs, and improve
decision-making by leveraging advanced technologies like AI and blockchain. It fosters seamless coordination across transportation modes,
promoting efficiency in the supply chain.
• The National Logistics Policy (NLP), launched in 2022, aims to reduce India’s logistics cost from the current 13-14% of GDP to global
benchmarks of 8-9%. It focuses on developing infrastructure, improving multimodal transport, and streamlining regulatory processes. Key
objectives include promoting ease of doing business, reducing dwell times, and enhancing the global competitiveness of Indian goods.

Timeliness:
In India, we have a Just-in-case supply chain. So we have a big inventory [around 3 months] because of some uncertainty and all less essence of
time [10 to 15 mins delay; it's not a delay in Indian culture]. In other countries, the essence of time is so much [1min delay still counts as a delay]
that we can have a Just-in-time supply chain. So, the inventory is small [around 15 minutes to 30 minutes]. As the inventory is less, the usable
but non-performing asset is less. VUCA means Volatile, Uncertain, Complex, and Ambiguous, so it's very difficult to balance the supply and the
demand.
The ambiguity on Timeliness is so deeply rooted in our culture that it's high time India looked into this feature more with a social redemption.
The time value to be equated directly with the opportunity cost Nation incurs. It's unsettling that it's of little significance to us despite knowing
the timeliness parameter has such a huge dispersion from the LPI across the functionalities.
Awareness programs making people aware of being responsible on timeliness is of utmost priority. Apart for this educational and training

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Awareness programs making people aware of being responsible on timeliness is of utmost priority. Apart for this educational and training
programmes must be carried out.
To reduce the time required for allocating and reallocating shipping consignments, automation and AI-driven predictive analytics should be
implemented to enable real-time decision-making and minimize manual intervention. Blockchain technology can enhance transparency by
enabling accurate tracking of shipments and improving coordination among stakeholders. Additionally, upgrading software systems by
integrating advanced terminal operating systems (TOS) can streamline container allocation and movement processes, ensuring greater efficiency
in port operations. These measures not only optimize resource utilization but also minimize delays, improving the overall logistics process and
enhancing India’s competitiveness in global trade by aligning with modern technological advancements.

Tracking and Tracing:

China has highly advanced tracking systems powered by AI, IOT and Blockchain integrated across platforms. Cainiao (Alibaba's Logistic Arm) and
JD Logistics provide real-time, end-to-end consignment tracking. Innovations like drome warehousing and smart sensing enhance visibility,
whereas India still heavily relies on RFID and GPS facilities. Another main issue is the fragmented nature of Logistics in India , mostly owing to the
unorganized sectors. Platformization and standardization is the need of the hour as else gaps creep in the system hindering efficient tracking.
Government initiatives to improve the tracking and tracing include the formation of NICDC Logistics Data Bank (NLDS), a 50:50 JV between the
Government of India, and the National Industrial Corridor Development and Implementation Trust (NICDIT).The main goal is to offer
comprehensive visibility services for Export-Import (EXIM) containers across India and to provide comparative performance metrics for logistics
container operators, thus empowering stakeholders to make well-informed choices. The centerpiece of the NLDS initiative, known as the
"Logistics Data Bank System (LDB System)," consolidates data from diverse supply chain entities, delivering in-depth, real-time insights via a
unified platform. This advancement fosters operational efficiency, encourages transparency, and propels the modernization of India's logistics
framework.
Recently the Logistics Data Bank recorded tracking of 75 million Consignments. https://pib.gov.in/PressReleasePage.aspx?PRID=2061600
The Logistics Performance Index (LPI) by the World Bank, which assesses countries on their logistics capabilities, has acknowledged the crucial
impact of LDB on India's rising rankings. India's LPI position increased from 44 in 2018 to 38 in 2023, highlighting the considerable progress in
logistics efficiency attributed to LDB's efforts.

References:
• Logistics Performance Index (LPI) Report 2023 The World Bank. (2023). Connecting to compete 2023: Trade logistics in an uncertain global
economy – The Logistics Performance Index and its indicators. Washington, DC: The International Bank for Reconstruction and
Development. Available at: www.worldbank.org/lpi
• China Perspective
Su, Q., Shi, Y., Gao, Y., Arthanari, T., & Wang, M. (2024). The improvement of logistics management in China: A study of the risk perspective.
Sustainability, 16(6688). https://doi.org/10.3390/su16156688
• Customs and Logistics Activities
Kachanova, L., Kuzminova, O., Saadulayeva, T., Kuzminov, V., & Buttaeva, S. (2023). Customs and logistics activities in ensuring financial and
economic security. E3S Web of Conferences, 381, 01055. https://doi.org/10.1051/e3sconf/202338101055
• Mohr, D., Chu, F., Yadav, H., Joerss, M., Mundra, N., Wang, R., Saxon, S., & Li, Y. (2019). Fast and furious: Riding the next growth wave of
logistics in India and China. McKinsey & Company
• Gupta, R., Jambunathan, S., & Netzer, T. (n.d.). Building India: Transforming the nation's logistics infrastructure. McKinsey & Company.

LPI Customs Infrastructure International Shipment Service Quality Timeliness Tracking and Tracing
India(38th) 3.4 3 3.2 3.5 3.5 3.6 3.4
China(20th) 3.7 3.3 4 3.6 3.8 3.8 3.8

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