India’s logistics sector, which is also referred to as the backbone of the supply chain, has been reeling under high costs, largely due to inefficiencies across the value chain and the fragmented nature of the industry. Another important industry that forms the backbone of the Indian economy, the MSME industry, which heavily relies on the logistics sector to link its businesses to their customers, has been significantly feeling the brunt of this. With time-consuming manual processes, documentation, and regular interference from various authorities, MSMEs operating in the e-commerce model have been witnessing logistical challenges in cross-border trade. Further, small businesses deal with complex shipping processes and compliance issues, including several customs clearances and quality or packaging checks, along with financial problems as they are largely neglected by the formal banking sector.

The Indian government's ambitious goal of growing its economy to USD 5 trillion in three years will rely heavily on policymakers' ability to unleash the MSME sector. In the post-pandemic market, most businesses are going digital, which has opened new avenues for MSMEs to expand, such as omni-channel, social commerce, and exploring cross-border opportunities. The government has been making significant progress on making small and medium enterprises self-reliant through its "Make in India" initiative; however, it is imperative to understand that for the Atmanirbhar Bharat Abhiyaan to succeed, the logistics sector also must be strengthened to drive economic growth.

NLP and Gati Shakti to promote cross-border trade

The recent government initiatives for the logistics sector, such as the National Master Plan for Multi-Modal Connectivity (Gati Shakti) and the National Logistics Policy (NLP), will provide the required impetus to both the logistics and MSME sectors. NLP was launched with the primary goal of lowering logistics costs and streamlining processes for seamless coordination. Moreover, the policy is said to assist Indian businesses, especially MSMEs, to become globally competitive as it creates a robust logistics infrastructure for facilitating cross-border trade. NLP brings a digital approach, a robust logistics network, and a tech-enabled infrastructure port that aids the sector in cross-border trade. PM GatiShakti was launched to ensure that investments in infrastructure are well synchronised, with a more granular focus on developing logistics infrastructure and establishing multi-modal logistics facilities. Putting together, these policies are designed to help reinforce the participation of MSMEs in international markets in three important aspects: connectivity, technology, and efficiency. NLP, along with GatiShakti, ensures to help boost the competitiveness of domestic goods in the global market, encouraging businesses and strengthening their exports from India.

The Dedicated Freight Corridors (DFCs) have the potential to completely alter how products are moved from manufacturing centres to hubs for consumption or export. This more efficient, affordable, and trustworthy method of cargo transportation, will help lower India's absurdly high logistics expenses. The Free Trade Agreement (FTA) with India and its interim trade agreement and the Economic Cooperation and Trade Agreement (ECTA), negotiated in April of this year, were both ratified by the Australian parliament on November 22, 2022. A wide range of Indian industries, including but not limited to textiles, leather, furniture, jewellery, and machinery, will benefit from duty-free access to the Australian market. For roughly, 96.4 per cent (by value) of Australia's exports, India will receive zero-duty access. The current customs duty rate for many of these goods in Australia is 4-5 per cent.

Adoptation of Digital technologies to ease the cross border

With unparalleled ease, speed, and economic expansion, the Unified Logistics Interface Platform (ULIP) has created a national, integrated, and multi-pronged system that has propelled the Indian logistics industry. Implementation of other digital initiatives, such as the integration of technology through Digital Systems (IDS), Ease of Logistics (e-LOG), System Improvement Group (SIG), etc., is expected to reduce inefficiencies and allow paperless export and import. Besides this, faceless assessments for customs and provisions for e-way bills are a few initiatives that will ease business for MSMEs, empowering them to make timely deliveries. The growth of e-commerce and D2C business models has been driving growth in the last two to three years, achieving commendable results, and having a significant positive impact on the entire logistics industry in India. With its investment in technology and other government initiatives, MSMEs will get more control over the supply chain, uplifting India’s exports.

It is estimated that the Indian logistics sector will reach the USD 350-380 billion mark by 2025, and the goal is to bring the Indian logistics sector to the 25th position in the Logistics Performance Index in the next five years. While India pursues trade deals with different countries, favourable policies will make sure MSMEs boost their integration into the global supply chain network, acquire new markets, and build up strategic relations in key economies.