The influence of the National Logistics Policy on MSMEs in India

The word “logistics” may mean a number of different things. However, logistics can be summed up in three simple letters--RRR. This stands for “Right Product, Right Place, Right Time,” which is the goal of every logistical operation. 

Logistics, as an industry, acts similar to the nervous system in the human body, which links organs responsible for diverse but equally important tasks. Like a person who has suffered a malfunction of their nervous system, a country’s ability to function as a whole is impaired when the logistics sector fails. 

Successive administrations have made attempts to alleviate logistics industry constraints. These initiatives were cross-sectoral, concentrating on numerous logistics business facets. However, they were not as successful as anticipated, resulting in the industry’s poor performance.

The Indian government has developed the “National Logistics Policy 2022” in an effort to increase the industry’s efficiency and resilience.

Why did the logistics industry need a revaluation? 

The logistics market in India is valued at almost $200 billion, with the sector contributing over 14% to the country’s GDP. With over 20 specialised companies and 37 export promotion organisations, India’s logistics sector is very disorganised. This often led to fatal breakdowns in their ability to cooperate and coordinate with one another. 

Logistics also requires a large amount of human labour. More than 12 million people get their livelihood from this sector, which is projected to expand at a pace of 10.5% over the next five years. In addition, more than 80% of the workforce in this sector is unstructured. 

As new technologies become available, businesses in this sector are beginning to embrace and integrate them. As a result of all these factors, the logistics industry in India is at a pivotal crossroads in adapting to the requirements of the modern, worldwide economy.

National Logistics Policy: A booster dose for the industry

The National Logistics Policy (NLP) aspires to develop a technologically-enabled, integrated, cost-efficient, resilient, sustainable, and trusted logistics ecosystem in the country for accelerated and inclusive growth. The end goal of the new NLP is to alleviate problems faced by companies, particularly SMEs, and speed up expansion of the logistics industry. 

At the policy’s inauguration, PM Modi has emphasised that concerted efforts were made, and one of the manifestations of those efforts is today's National Logistics Policy, which aims to ensure quick last-mile delivery, end transport-related challenges, save time and money for manufacturers, and prevent wastage of agro-products.

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The bouquet of benefits for MSMEs 

With the introduction of NLP, Micro, Small, and Medium-Sized Enterprises (MSMEs) will benefit from the decrease in logistics costs since they will have more money available for other purposes. Storage facilities that meet industry standards will reduce the likelihood that goods may spoil during storage. Reduced red tape and streamlined procedures for EXIM transactions will make conducting business less cumbersome. Using digital tools will increase openness.

The logistics industry has been unorganised for a long time, and the NLP is an effective amelioration step towards the next era of logistics. It is all set to structurally, unify, and economise (SUE) infringing factors.

Structurisation: PM Gatishakti will augment the NLP. The development of infrastructure, particularly the improvement of water transport, would promote cost-effective and environmentally sound transportation. In addition, specialised Freight Corridors will enhance logistical connection for systematic infrastructure development. The strategy includes a warehouse system improvement. 

Unification: Under the NLP, the Unified Logistics Interface Platform (ULIP) has been designed as an integrated gateway that provides real-time access to information on the location of commodities. This is anticipated to make it easier for MSMEs to do business, since it would shorten the lengthy, laborious procedures used in EXIM trading. The unorganised logistics industry will be encompassed by cutting-edge technology like artificial intelligence and blockchain. In addition, e-Log inside the ULIP system will aid business organisations in voicing their complaints and receiving prompt responses from government bodies.

Economisation: The NLP intends to reduce logistics costs to single digits from the current 13-14%. By successfully cutting logistics costs, India is anticipated to become internationally competitive. When costs are comparatively reduced, it will encourage more MSMEs to use technologically-powered logistics services. The initiative intends to reduce transit costs from 6% of GDP to 4%, storage costs from 3.5% to 2.5%, and inventory costs from 2.5% to 1%, according to a study.

Panoptic perspective

The NLP is a massive booster dose for invigorating the MSME sector’s competitiveness by decreasing logistical expenses. It is also projected to include a number of efforts to enhance logistical performance and infrastructure development to facilitate the nation’s transition into a global manufacturing powerhouse. 

Overall, the NLP will bolster the MSME logistics ecosystem with the ABC formula: Advantage of integration, Banishing delays, and providing a Competitive edge.