BackDigitalize all supply chains to unlock trade efficiencies
In 2018, India was ranked 44th among 160 countries on the World Bank’s Logistics Performance Index, below many of its trade rivals, which points to much scope for improvement.
PremiumIndia aspires for a fast-track growth revival to become a $5 trillion economy by 2024. The Prime Minister, in his call for Atmanirbhar Bharat, envisions India as “a bigger and more important part of the global economy", with policies aiming to make the country efficient, competitive and resilient, as well as self-sustaining. In the age of the fourth industrial revolution, India must digitalize supply chains to reduce inefficiencies, improve transparency, reduce logistics costs, and enhance the overall global competitiveness of Indian industries, especially small and medium enterprises. Given that the logistics cost in India is estimated at around 13% of gross domestic product (GDP), this has been a concern, with both the government and private sector looking for ways to reduce this cost and ensure a smooth supply chain. We are currently witnessing difficulties faced by businesses due to covid-related disruptions. This reiterates the importance of an efficient logistics ecosystem for Indian businesses and the economy to recover from the impact.
Let’s focus on costs. In 2018, India’s rank on the World Bank’s Logistics Performance Index was No. 44 among 160 countries, below such countries as China (26), Chile (34) and South Africa (33). India scored lower than competing developing countries in customs, tracking, tracing and timeliness. In this context, Indian policymakers have repeatedly pointed out a need to increase the agility, stability, transparency and speed of supply chains through the use of technology.
The government has taken digitalization measures via initiatives such as the Goods and Services Tax Network, a GST enabler that has been a game-changer in improving the experience of importers, exporters and logistics service providers. Apart from ICES 1.5 and ICE GATE, new developments like the Express Cargo Clearance System for express delivery and Single Window Interface for Trade (of customs) for electronic data interchange across multiple agencies involved in customs clearance have also eased business processes. Customs has a robust risk management system, and the Central Board of Indirect Taxes and Customs has launched its eSanchit mechanism (e-storage and computerized handling of indirect tax documents) for paperless processing and the uploading of supporting documents to facilitate trade.
Yet, there are some technology gaps that need to be addressed. In case of imports, for example, the interaction between importers and customs is not seamless. Data has to be submitted via a customs broker or authorized courier in most cases; as a result, the importer has to manage communication between and across multiple channels, which could include the carrier, clearance service provider, customs department, partner agencies of the government, etc. At times, they do not get advance intimation or instructions needed for shipment processing and clearances, and do not have a consolidated view of the status of their import shipments at every stage. If this is automated, it will in turn deliver a smooth flow of information between importers and customs. Digitalization not only enables direct tracking and traceability, but also enhances tertiary processes like audits, financial transparency and risk management through data feeds, collection and abstraction, which facilitates easier governance and leads to reductions of time and cost.
Private-sector players are developing various tools to automate manual processes. One such example of digitalization is the DHL Import Easy Tool, which is a first-of-its-kind website-based platform that globally offers a single interface where importers can view and manage all their transactions pertaining to the import process in real-time. This proprietary tool currently being piloted in India is designed to be a one-stop intuitive platform for importers. The tool has so far been adopted by 5,500 importers that use the services of DHL Express, and it promises to help reduce the average turnaround time for imports, apart from enhancing the experience of importers. The key features of this platform include an in-tool communication facility that covers all touchpoints, from pre-clearance and payments to post-clearance instructions for better paperwork management, aimed at hassle-free and faster shipment processing; a single-window dashboard view for all import shipments at every stage of transit, and a user-friendly interface for uploading and downloading shipment paperwork. Such tools highlight an opportunity that exists for many industries to improve their own efficiencies and save costs through digitalization. The government should promote such initiatives under its forthcoming Foreign Trade Policy and National Logistics Policy, both of which are in their final stages. Companies can be given some incentives to adopt digitalization, for example. Subsidizing logistics costs would be compliant with the World Trade Organization’s subsidy rules.
To conclude, while India has risen on the World Bank’s Ease of Doing Business Index from No. 77 in 2018 to No. 63 in 2019 across 190 countries, its 68th rank in “trading across borders" can be improved upon through digitalization. To begin with, India should try to catch up with rival developing countries on this by using tools like DHL’s. Beyond that, Indian industry must develop and integrate innovative tools, while India’s government should facilitate their use and secure technology interfaces in partnership with industry for their implementation.
Arpita Mukherjee is professor at the Indian Council for Research on International Economic Relations (ICRIER). These are the author’s personal views.
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