Tax Overhaul Reshaping India Supply Chains, Transport Networks
Report shows GST will drive growth despite jolt from recent move to replace currency notes
BAAR, Switzerland – July 19 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, the Agility Mid-Year Emerging Markets Review finds.
India’s Goods and Services Tax (GST), introduced July 1, 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 invest in system upgrades to improve the efficiency of their supply chains.
The GST could cut logistics costs in India’s formal, organized logistics sector by 20% and provide a dramatic boost to the country’s surging economy, according to the Agility report, which also examines the impact of the UK’s Brexit on emerging markets.
Essa Al-Saleh, CEO of Agility Global Integrated Logistics, says 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,” Al-Saleh says. “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 Agility report was prepared by Transport Intelligence, a leading analysis and research firm for the logistics industry. 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 Agility 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.
Agility Mid-Year Emerging Markets Review: www.agility.com/2017index
Agility partners with Transport Intelligence to produce the annual Agility Emerging Markets Logistics Index, a ranking of the world’s 50 leading emerging markets and a survey of more than 800 global logistics industry professionals.