Problems with Movement of Goods Within India

The quality of the road network infrastructure in India is in need of drastic improvement and better coordination among regulatory authorities can reduce the delays in travel times.

The biggest markets in the world, i.e., the largest concentration of people in a geographic entity, are China, India, US and the EU. With such large markets, internal trade should account for a significant portion of overall economic output. However, internal trade in India accounts to less than 15% of GDP, which is one of the lowest in the world. The Eurozone does slightly better with internal trade accounting for 20% of GDP, in China it hovers around 35% of GDP and in the US, internal trade forms 40% of GDP.

The low share of internal trade in India can be explained by many factors. Complex, varied and multiple tax structures in different states. Laws and regulations also differ from state to state which increases transaction and compliance costs, which are then passed on to the consumers. Agricultural commodities and manufactured commodities have their own set of problems. However, a very practical and big constraint in the movement of goods within India is the state of road infrastructure, which this post shall try to highlight.

India has the second highest road network in the world, spanning over 4.7 million kilometers, which easily makes it the most important mode of transportation in the country. It carries over 60% of the country’s total freight traffic and about 85% of the passenger traffic. While this is impressive in its own right, the state of roads in India actually falls behind the requirements. One way to measure this is to calculate the volume of road freight growth in India and the corresponding growth in expansion of the road network. While road freight volume and the number of road vehicles have been growing at a compounded annual growth rate of 9.1% and 10.8% respectively, the growth rate of length of roads lags behind at 4%.

Further, most of the road network in India is rural roads that do not allow the smooth transit of heavy vehicles meant to transport goods across states. The share of motorways/expressways and national highways in the total road network is abysmal when compared to many developing and developed countries. India has only 1.7% of its total road network in the form of expressways and highways, whereas the corresponding figure for the US is 5.7%, UK – 12.6%, South Korea – 16.9% and China 2.6%.

This results in lower truck speeds and delays in transportation of goods across the states. India has one of the lowest average speeds for trucks. This table below, taken from a report by Ernst Young and Retailers Association of India (2013), shows different parameters to gauge the efficiency of the transportation system in India.

Different indicators of efficiency in road transportation

Different indicators of efficiency in road transportation

Apart from the lack of good physical infrastructure, the regulatory structure in India causes many more delays in road transportation. India’s trucks spend only about 40% of their time moving on the road. The rest of the time is taken up at checkpoints and tollgates. A McKinsey report and a EY summit with FICCI confirms that India spends nearly 13% of its GDP on logistics.

A sample of the different checkpoints and detentions for trucks on national highways.

A sample of the different checkpoints and detentions for trucks on national highways.

A World Economic Forum Report observes that “a truck carrying goods from Gurgaon to Mumbai has to pass through 36 checkpoints and takes up to 10 days to reach its destination.”

“Vehicles are frequently detained for checking essential documents, like sales tax, payment of market fee, octroi, entry permits, law and order concerns, protection of environment and the endangered species etc. Besides, there are numerous other reasons under different legal provisions that can detain a vehicle, like check on the movement of essential commodities, food adulteration and hazardous chemicals etc. These checks are generally conducted by respective agencies at separate points, resulting in more than one detention. There exist flying squads or surprise checking teams other than normal checkpoints, who are empowered to stop and check the vehicle at any point within their jurisdictional limits and detain it for any violation” notes a Ministry of Agriculture Report on Removal of restrictions on internal trade in agricultural commodities.

Better coordination between the various agencies involved in checking for regulatory compliance can reduce the number of stoppages and improvement in travel times.

In order to develop inter-state trade within India and make India a manufacturing hub, it is imperative to fix the structural infrastructure issues, both in terms of the quality of roads and the number of stoppages due to regulatory checking.

 Anupam Manur is a Policy Analyst at Takshashila Institution and tweets @anupammanur

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3 Responses to Problems with Movement of Goods Within India

  1. Anuj Gupta July 19, 2015 at 2:53 pm #

    Good blog. Ministry of Road Transport and Highways is already taking logistics efficiency seriously e.g. See
    http://morth.nic.in/tenderdetails.asp?lang=1&tid=725

  2. Guru Aiyar April 6, 2016 at 12:20 pm #

    Excellent use of data points to convey our supply chain problems.

  3. Anupam Manur April 6, 2016 at 12:28 pm #

    Thanks Guru!

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