India’s logistics industry takes a tax-driven improvement path
- News Feed
- Wednesday, 23 August 2017
The shift to a unified national tax has set off a wave of change in India's notoriously inefficient logistics sector as companies alter the way they store, move and account for goods, according to the Agility Mid-Year Emerging Markets Review.
India's Goods and Services Tax (GST), introduced 01 July, rolled more than a dozen state and federal levies into a single tax. The GST is already prompting logistics providers and their customers to consolidate warehousing, revamp road freight strategies and to upgrade systems to improve the efficiency of their supply chains.
The GST could cut logistics costs in India's formal, organised logistics sector by 20 per cent and provide a dramatic boost to the country's surging economy, according to the report, which also examines the impact of the UK's Brexit on emerging markets.
Essa Al-Saleh, chief executive of Agility Global Integrated Logistics said the GST and other changes encourage long-overdue investment in Indian infrastructure.
"The GST eliminates borders and checkpoints between India's 29 states, paving the way for big efficiency gains," said Al-Saleh. "Companies can carry less inventory, move to hub-and-spoke warehousing, take advantage of long-haul trucking, and look to third-party logistics providers to improve operations and save."
The report indicates that India's overnight decision in late 2016 to introduce new bank notes sapped economic growth and curtailed activity in the country's massive, cash-based informal sector of small merchants, truckers and others. But it concludes that the impact of 'demonetisation' will be short-lived.
In its look at Brexit, the Agility report highlights hurdles faced by the UK in its effort to 'cut and paste' existing European Union trade rules into an exit agreement with the EU. The more difficult the terms of a UK-EU divorce, the more likely the UK is to seek ambitious new trade deals with emerging markets countries, particularly Commonwealth countries in Southeast Asia and Africa, the report finds.
Brexit leaves key emerging markets'-exporters South Africa, Kenya, Turkey and others exposed because the value of the pound has declined and the UK economy is expected to be smaller as a result of the UK's departure from the EU.
The report also suggests that emerging markets countries using the UK as a gateway to Ireland and other EU countries will need to find new routes to those markets. UK exports to the EU could face burdensome checks and Customs procedures unless the UK hews to EU product standards and British transporters conform with EU transport rules.
For more on the Emerging Markets Review: www.agility.com/2017index
