If there was a singularly clear message from from the delegates attending the recent Air Cargo India conference and exhibition in Mumbai, it was that planning and development of India’s air cargo and overall logistics infrastructure must be based on long term growth forecasts and not current or near-term growth.
"Too much of India’s infrastructure has been planned around short-sighted growth forecasts,"noted one air cargo executive.
"There’s a saying that in India once you’ve built something its already out of date,"he added.
While speaker after speaker acknowledged that meaningful progress had been made, it was not fast enough nor was itsubstantial enough.
Highest landed costs
India currently has one of the highest landed logistics costs anywhere in the world, nearly 13 per cent of GDP compared with Germany for instance, at about 8 per cent of GDP, according to Ram Menen, senior vice president at Emirates SkyCargo, speaking at the ACI event.
This is due to inefficiencies at various levels, including slowness of roads, lack of widespread technology, slow turnaround times at sea and airports, administrativedelays, fractured political environment and bureaucracy, to name only a few.India is made up of 28 states, each witha border that is often regarded as beingsimilar to that between two countries,he noted.
It’s cheaper and faster to import into India directly from Dubai or Singapore than from Mumbai to other domestic destinations, said Menen.
Infrastructure is a very serious issue that must be remedied otherwise economic growth will suffer, he warned.
"Infrastructure development is currently on fast forward mode, but is it catching up fast enough?"asked Menen.
"From here on the growth in India will be exponential. So if you are looking at the past to dictate what the future infrastructure is going to be, you’re not on the right track,"he said.
With a continuing pace of economic growth, forecast to be at least 9 per cent next year for a total GDP of US$1.25 trillion ¨C placing India within the elite 12 member club of trillion dollar economies ¨C India will need at least US$330 billion in infrastructure investments over the next five years according to Menen.
Menen goes on to argue that the country must increase the level of spending from the current 4.6 per cent of GDP to at least 8 per cent if it hopes to sustain the blistering pace of economic growth.
Focus on supply chains
The country also needs to focus its efforts at other related aspects, such as developing and promoting the science of supply chain management. Supply chains must be viewed in collaborative terms and they must have the ability to communicate in real time, he said.
"India needs to take supply chains to the next level,"and it’s in a position to leap-frog he said pointing to the Tata Motors’ Nano car as an example of a supply chain that is so efficient the car can be sold for a mere US$2,500.
Menen advocates that while India is busy getting its infrastructure and supply chains in shape, Singapore and Dubai should be leveraged to gain efficiencies and gradually, as things improve in India, it can gradually take back these activities.
"Sometimes when you want to build something you have to lift it up and support it while you build underneath and that’s what Dubai and Singapore can do for India,"said Menen.
No going back
"The mind-set is there, now it’s just a question of how,"he said. "The politicians cannot go back, they can only go forward,"in part he said because over 50 per cent of the Indian population is under the age of 25 and they are eager to move India forward.
"They are the next generation of bureaucrats and all this outsourcing that is coming in is changing the psyche of the people."
Technology will also accelerate this change, he said, but noted the irony that India exports substantial IT expertise around the world, but does not implement it widely at home.
But by far the largest impetus will come as a result of India’s next level economic development when the manufacturing and retail sectors take root, within the next three to four years Menen said.
Up until now it has been the services sector that has seen the fastest growth, but this will soon be overtaken by the retail sector Menen argues. "I don’t think anything that’s happened in India so far has really scratched the surface,"he added.
And this is clearly good news for the air cargo sector, as manufacturing and even more so retail, will be the foundationfor cargo growth going forward.