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 increases the speed of doing business.
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 by 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 while ignoring the reality within a domestic setting. Hence, 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 like border control agencies, infrastructure and services quality; and the others on the outcome side of the supply chain service delivery like competitively-priced international shipments, tracking and tracing and timeliness.
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 54th and so the jump this time around is tremendous. With this jump, India is one of the best performing economies relative to the average income level of its people.
So far the World Bank has put out five editions of the report since its inception in 2007 with the most recent one 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.
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.
Third, the domestic LPI offers rich insights into 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 percent of respondents feel port charges are high in India. Similarly, on the quality of infrastructure, a massive 60 percent feel roads are of low quality/very low quality in India. While maritime transshipment is seen by 36 percent 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 percent. 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 lacking. These includes 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 will also be a commitment to Move in India.