India's Logistics Performance Index 2023 Rankings and Analysis

Understanding the Logistics Performance Index (LPI)

The Logistics Performance Index, commonly referred to as the LPI, is a comprehensive index developed by the World Bank to evaluate the efficiency of a country's logistics sector.

• The LPI assesses the ease of establishing reliable supply chain connections and the structural factors that facilitate it, including the quality of logistics services, trade and transport-related infrastructure, and border controls.
• The LPI serves as a benchmarking tool to compare the logistics performance of different countries.
• The LPI 2023 presents a comparative analysis across 139 countries. For the first time, the 2023 LPI measures the speed of trade with indicators derived from extensive datasets tracking shipments.

India's Improved Rank in the Logistics Performance Index

India's ranking in the 2023 LPI is 38 among 139 countries, marking a jump of six places. This improvement can be attributed to India's substantial investments in soft and hard infrastructure and technology, which have notably enhanced port performance. The latest edition, the seventh, was postponed by three years due to the disruptions caused by the Covid-19 pandemic.

Image source: Economic Times

Investments in trade-related infrastructure:

• The Indian government's strategic investment in trade-related soft and hard infrastructure has effectively connected port gateways on both coasts to the economic poles in the hinterland.
• This investment has significantly improved the country’s infrastructure ranking from 52 to 47.

Improved international shipments:

• India’s ranking for international shipments has also improved, moving from 44 in 2018 to 22 in 2023.
• In addition, the country has climbed four spots in logistics competence and equality, ranking 48.

Modernization and digitalization:

• The report emphasizes that modernization and digitalization are enabling emerging economies like India to leapfrog advanced countries.
• End-to-end supply chain digitization is allowing countries to reduce port delays by up to 70% compared to those in developed countries.

Reduced logistics costs:

• The Indian government’s announcement of the PM Gati Shakti initiative, a National Master Plan for multi-modal connectivity, aims to reduce logistics costs and boost the economy by 2024-25.

Importance of logistics for international trade:

• According to officials at the World Bank, logistics is the lifeblood of international trade and a powerful force for economic growth and poverty reduction.
• Policies targeting seaports, airports, and multimodal facilities can help improve reliability.

Key Factors Contributing to India’s Improved Performance in LPI

• Dwell time:
  • Dwell time refers to the time that vessels actively engage in loading or unloading cargo while present at a port.
  • Dwell time in Indian ports has reached an optimal level of approximately three days, surpassing countries like the UAE, South Africa, the US, and Germany.
• Turnaround time (TRT):
  • TRT refers to the total time taken for a ship to complete its port visit and return to its intended route. It includes the time spent on various activities and processes related to the ship’s arrival, cargo operations, and departure.
  • India’s average TRT of 0.9 days is among the best globally, outperforming Germany, Singapore, Belgium, the UAE, New Zealand, Malaysia, and others.

What brought these positive changes?

• Infrastructure Upgradation and Investments
  • Large investments have been made in upgrading infrastructure in the ports and shipping sector, leading to improved efficiency and productivity.
  • Reforms, adoption of new technologies, emphasis on public-private partnerships, and commitment to ease of doing business have been key factors in enhancing port operations.
• Increased Capacity and PPP Projects
  • The capacity at 12 major ports in India has increased from 871 million metric tonnes (MMT) in 2015 to 1,617 MMT in 2023.
  • Overall, the total capacity of Indian ports has risen from around 1,560 MMT in 2015 to over 2,600 MMT.
  • The value of operationalization of public-private partnership (PPP) projects in major ports has witnessed nearly a 150% increase, contributing to increased operational efficiencies and handling 54% of total cargo in major ports.
• Focus on Decarbonization and Sustainability
  • The government’s focus on decarbonization and sustainability in the maritime sector has resulted in a 14-fold increase in the use of renewable energy in major ports over the past eight years.
  • The combined renewable energy generated by four major ports now exceeds their total energy needs.
  • The Harit Sagar Green Port guidelines have been introduced to promote safe, efficient, and sustainable ports while implementing sound environmental practices.
• Digitalization and Policy Reforms
  • The National Logistics Portal (Marine) and the Sagar Setu app have been launched, providing a seamless digital platform for stakeholders in the logistics sector.
  • The Centre has undertaken key policy and legislative reforms, including the Major Port Authorities Act, Marine Aids to Navigation Act, and Indian Vessels Act, to enhance autonomy, safety, efficiency, and standardisation in the port sector.

India’s Vision of Maritime Power

• The government’s efforts to develop ports as economic hubs align with India’s ambition to become a global maritime power, as envisioned in the Maritime India Vision 2030.