Keeping up with major economic and regulatory developments is necessary for success in RBI, SEBI, or NABARD exams. In today’s edition of Vishleshan, we break down two important topics: Logistics Reforms and Keeping WTO Relevant. Both topics are not only relevant from an exam perspective but also crucial for understanding how resources are managed. Read on to get well-informed on this trending topic.

ALSO CHECK: News Analysis of 25th June 2025 

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Logistics Reforms

Context: India has taken big strides in its logistical infrastructure but must press ahead with reforms to meet its aspiration of becoming a global trading powerful. Easing and speeding up exports is critical to that endeavour.

Source: Mint

India is actively pursuing its ambition to become a global manufacturing and export powerhouse, a goal significantly intertwined with the efficiency of its logistics sector. The country has made notable progress in improving the movement of goods, as reflected in its climbing ranks in global logistics indices. While it is catching up with logistics leaders like China, continued investment and reforms are essential to bridge the remaining gaps and fully realize India’s trade aspirations.

Merchandise Trade vs. Service Trade:

Understanding the distinction between merchandise and service trade is crucial for analysing a country’s global economic engagement.

Merchandise Trade (Goods Trade):

• What: Involves the export and import of tangible physical goods. These are products that can be touched, stored, and transported physically across borders.
• Examples: Manufactured goods (machinery, textiles, electronics), agricultural products (grains, fruits), raw materials (minerals, crude oil).
• India’s Trend (Exports): India’s merchandise exports grew significantly from $317.5 billion in 2014 to $441.7 billion in 2024, a 39% rise. This growth is attributed to flagship government schemes like Production-Linked Incentives (PLI), Make in India, and the Phased Manufacturing Programme.

Service Trade:

• What: Involves the export and import of intangible services. These do not result in a physical product but provide value through activities performed for others.
• Examples: IT services, business process outsourcing (BPO), tourism, financial services, healthcare services, education services, transportation services.
• India’s Trend: While the article primarily focuses on merchandise exports in this context, it is widely known that India has a strong services export sector, particularly in IT and IT-enabled services. (Note: specific data for service export trends over the last 5 years is not provided in this article, but external knowledge confirms its robust growth.)

Logistics: Meaning and Importance to the Economy

Logistics refers to the overall process of managing how resources are acquired, stored, and transported to their final destination. In the context of trade, it involves the efficient planning, implementation, and control of the movement and storage of goods, services, and related information from the point of origin to the point of consumption.

Importance to the Economy:

• Cost Reduction: Efficient logistics reduces transportation, warehousing, and inventory costs, which directly impacts the competitiveness of goods.
• Increased Trade and Competitiveness: Streamlined logistics facilitates faster and more reliable movement of goods, boosting both domestic and international trade. It makes a country’s exports more competitive and attractive.
• Supply Chain Efficiency: Robust logistics is critical for the smooth functioning of global value chains, ensuring timely delivery of inputs and finished products.
• Economic Growth and Employment: Investment in logistics infrastructure (roads, ports, railways, airports) creates jobs and stimulates economic activity. Improved logistics supports manufacturing and other sectors by lowering operational costs.
• Ease of Doing Business: A well-functioning logistics system improves a country’s “trading across borders” performance, enhancing its attractiveness for foreign investment and business operations.

India’s Logistics Cost-to-GDP with Respect to Leading Economies:

The article mentions that in 2020, “exporting from India took significant time and money”.

• Cost and Time in India (2020):
  • Border procedures: 52 hours and $212 per container.
  • Export documentation: 12 hours and $58.
  • Importing: 65 hours and $266 for border clearance, and 20 hours and $100 for documentation.
• Comparison with China (2020): China processed the same export shipments within 21 hours at a slightly higher cost of $256 per container. It processed documents faster (9 hours on average, documentation cost $74).
• Comparison with South Korea (2020): South Korea was the “world leader,” doing border checks in just 13 hours at a cost of $185, and document processing in 1 hour for only $11.

(Note: India’s logistics cost as a percentage of GDP has historically been high, typically in the range of 13-14%, compared to global benchmarks of 8-10% in developed economies.)

National Logistics Policy:

The National Logistics Policy (NLP) was launched by the Government of India in September 2022. (The hint mentions “National Logistics Mission” but the widely recognized government initiative is the National Logistics Policy).

• Objectives: The primary objectives of the NLP are to:
  • Reduce Logistics Cost: Bring down India’s logistics costs to be comparable with global benchmarks (e.g., target of 8-10% of GDP).
  • Improve India’s LPI Ranking: Enhance India’s performance in the Logistics Performance Index.
  • Boost Competitiveness: Improve the competitiveness of Indian goods both domestically and globally.
  • Create a Unified Logistics Ecosystem: Develop a technologically enabled, integrated, cost-efficient, resilient, and sustainable logistics ecosystem.
• Specific Targets:
  • Reduce logistics costs as a percentage of GDP from 13-14% to 8% by 2030.
  • Improve LPI ranking to be among the top 25 countries by 2030.
  • Create a data-driven decision support mechanism for the logistics ecosystem.

India’s Performance in World Bank’s Logistics Performance Index (LPI) 2023

The Logistics Performance Index (LPI), compiled by the World Bank, tracks the efficiency of international supply chains. It assesses six key dimensions: customs efficiency, infrastructure, ease of coordinating international shipments, logistics quality, tracking and tracing ability, and punctuality (frequency of on-time shipments).

Overall Rank and Score:

• India’s overall LPI rank improved significantly from No. 54 in 2014 to No. 38 in 2023.
• Its LPI score rose from 3.08 in 2014 to 3.4 in 2023 (out of 5).
• In comparison, China was still ahead, ranking 19th globally with a score of 3.7 in 2023.

Performance Across Parameters (India vs. China, 2014 & 2023):

Key Improvements:

• Timeliness: India’s rank rose from No. 51 to No. 35.
• Logistics Quality: India’s rank improved from 52 to 38, signifying “higher professionalism and reliability in freight services”.
• Infrastructure: India’s rank rose from No. 58 to No. 47, reflecting “the impact of recent investments in physical logistical infrastructure”.
• Dwell Time: India achieved impressive reductions in ‘dwell time’ (cargo held at terminal/port). India is “on par with Singapore with a dwell time of only 3 days,” which is “an achievement ahead of the UAE, South Africa, US and Germany”.
• Port Turnaround Time (TRT): TRT at major ports declined significantly from 94 hours in 2013-14 to 48.06 hours in 2023–24.
• Shipment Ranking: India climbed from No. 44 in 2014 to No. 22 in 2023 in world ranking in shipments.

Government of India’s Actions to Bring Down Logistics Cost

India’s recent progress in logistics is largely underpinned by massive investments and strategic reforms across various modes of transport:

1. National Corridor Development Programme (Bharatmala Pariyojana):
   • Launched in 2017, this flagship program is developing 26,000km of economic corridors, ring roads, bypasses, and elevated corridors to ease city congestion and enhance freight movement.
   • As of November 2024, 18,926km of roads had been constructed under this scheme.
   • Under Bharatmala, 35 multimodal logistics parks are also being built with an aggregate outlay of ₹46,000 crore, capable of transporting 700 million metric tonnes of cargo. These parks integrate various modes of transport in a cost-effective manner.
2. Record Highways and Expressways Constructions:
   • The coverage of National Highways (NH) increased from 65,569km in 2004 to 146,145km in 2024.
   • Four and more lane stretches rose 2.6 times since 2014.
   • Construction tempo picked up sharply, from 12.1km per day in 2014-15 to 33.8km per day in 2023-24.
3. Expanded Domestic Air Transportation:
   • Initiatives like the UDAN scheme (Ude Desh ka Aam Nagrik) have expanded regional air connectivity, supporting faster movement of high-value and time-sensitive cargo.
   • Investment in airport infrastructure and cargo terminals.
4. Inland Water Transportation (IWT):
   • Development of National Waterways, aiming to utilize rivers for cost-effective and environmentally friendly cargo movement, especially for bulk goods.
   • Sagarmala Programme also focuses on enhancing coastal shipping and inland waterways.
5. New Ports Under Development and Port Efficiency:
   • India’s port cargo handling capacity nearly doubled from 800.5 million tonnes annually in 2014 to 1,630 million tonnes in 2024, an increase of 87%.
   • Improved efficiency led to a significant decline in turnaround time (TRT) at major ports from 94 hours in 2013-14 to 48.06 hours in 2023–24.
   • Average berth-day production has gone up by 52%.
   • Increased tourism through cruise terminals and lighthouse sites is also noted.
6. Switch to Renewable Energy:
   • Transitioning to renewable energy for transport could reduce reliance on volatile fossil fuel prices, leading to more stable and potentially lower logistics costs in the long run.

These reforms “represent a paradigm shift”. India is “slowly putting in place the logistical framework necessary to support its dream of becoming an export-led economy”. Continued efforts are essential to “bridge the gap between India’s expansive trade aspirations and the harsh realities of trading on the international stage, thus making India not just a significant exporter but a truly competitive one”.

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Keeping WTO Relevant

Context: A large number of developing economies have been benefitted, through their participation in FTAs, and increased their integration with GVCs and their share of global trade.

Source: Business Standard

The World Trade Organization (WTO), a cornerstone of the multilateral trading system, finds itself at a critical juncture. Its Director-General, Ngozi Okonjo-Iweala, recently emphasized the urgent need to reassert the institution’s relevance amidst challenges, particularly the suppression of its voice by dominant funding economies. While the US blocking appointments to the Appellate Body is a visible issue, the WTO’s decline, marked by prolonged negotiations and a lack of substantive outcomes on key trade liberalization issues, predates this development. The evolving global trade landscape, driven by global value chains (GVCs) and the proliferation of Free Trade Agreements (FTAs), demands a re-evaluation of the WTO’s traditional consensus-based decision-making processes.

World Trade Organisation:

• What is WTO? – The World Trade Organization (WTO) is an intergovernmental organization that regulates international trade. It was officially established on January 1, 1995, under the Marrakech Agreement, succeeding the General Agreement on Tariffs and Trade (GATT) that was created in 1948. It is the only global international organization dealing with the rules of trade between nations.
  • Membership: The WTO has expanded significantly from 23 founding members of GATT to 128 when GATT transitioned to the WTO in 1994, and further to 166 members in 2025.
• Its Mandate: The WTO’s primary mandate is to promote freer and fairer trade among nations. This is achieved by:
  • Administering existing trade agreements: Ensuring members abide by the agreed-upon rules.
  • Acting as a forum for trade negotiations: Providing a platform for member governments to negotiate new trade agreements.
  • Handling trade disputes: Through its Dispute Settlement Mechanism (DSM), resolving trade disagreements between members.
  • Providing technical assistance: Helping developing countries build their trade capacity.
  • Monitoring national trade policies: Ensuring transparency and compliance.
• Major Contributions of the WTO to Global Trade:
  • Reduced Tariffs and Trade Barriers: Through various rounds of negotiations (especially under GATT), the WTO has significantly reduced tariffs and non-tariff barriers, leading to increased global trade volumes.
  • Rules-Based System: It established a predictable, non-discriminatory, and rules-based multilateral trading system, which fostered stability and confidence in international commerce.
  • Dispute Resolution: The Dispute Settlement Mechanism, despite its current challenges, has successfully resolved numerous trade disputes between countries, preventing trade wars and promoting adherence to rules.
  • Trade Liberalization: Facilitated agreements like the Agreement on Trade Facilitation and, more recently, on fisheries subsidies, which were concluded after “prolonged and difficult negotiations”.
  • Information Technology Agreement (ITA): Signed in 1996, it facilitated “duty-free trade for a set of identified information technology products to all WTO members”.
• Major Issues WTO Has Failed to Address (or where progress has stalled):
  • Dispute Settlement Mechanism (Appellate Body): The most prominent failure is the “blocking appointments to the Appellate Body” of the Dispute Settlement Mechanism by the United States, effectively rendering it inoperable.
  • “Long-drawn negotiations and a lack of substantive outcomes”: The WTO has seen a “decline” due to its inability to achieve significant breakthroughs in negotiations.
  • Agricultural Subsidies: Achieving consensus on reducing agricultural subsidies, particularly by developed countries, has been “hard to achieve”.
  • Non-Agricultural Market Access (NAMA): Liberalization of industrial goods trade has also faced challenges due to varied interests of members.
  • Services Liberalization: Despite its growing importance in global trade, significant liberalization in services has been difficult to achieve multilaterally.
  • Doha Development Agenda (DDA): The WTO’s “first and only trade liberalisation ’round’, the Doha Development Agenda, being effectively suspended” due to a “persistent negotiating impasse on major issues”.
  • Evolution of Rules: The “rules and provisions at the WTO have hence undergone limited, if any, evolution beyond what was achieved in the last round of GATT”.

Analysis of the Article: Decoding the WTO’s Crossroads

The article argues that the WTO is at a crossroads, needing to adapt to the evolving global trade landscape dominated by global value chains (GVCs) and the proliferation of Free Trade Agreements (FTAs) and Plurilateral Agreements (PAs), while struggling with its traditional consensus-based approach.

1. WTO at a Crossroads:

• Fundamental Processes: The WTO stands at a crossroads “in terms of its fundamental processes and the objective of promoting freer and fairer trade”.
• US Role: Ngozi Okonjo-Iweala, WTO Director-General, emphasized the need to speak up for the WTO, “particularly when the dominant funding economy [US] has chosen to suppress its voice and relevance”.

2. Rise of Alternative Rule-Making Avenues (FTAs and PAs):

• Imperatives of GVCs: The imperatives of “evolving global trade, which is increasingly driven by global value chains (GVCs),” have led to FTAs and issue-based PAs becoming “alternative routes for rule-making”.
• Proliferation of FTAs: FTAs, permitted under GATT Article XXIV, have seen a “remarkable proliferation in the 21st century.” From less than 100 in 2000, the number of FTAs notified to the WTO is “well over 600 in 2025”.
  • Increased Depth of FTAs: Modern FTAs have acquired “greater depth,” encompassing “higher-grade provisions related to intellectual property, investment and services liberalisation, and environment and sustainable governance (ESG)”.
  • Benefits of Mega-Regionals: “Mega regional trade agreements,” particularly with common and cumulative rules of origin, have contributed to the “ease of FTA utilisation for member economies,” benefiting many developing economies through increased integration with GVCs and a larger share of global trade.
• Slower Pace of PAs: PAs, also under the WTO’s aegis, “have however progressed at a much slower pace than FTAs”. While IT Agreement (1996) was a success, recent PAs on e-commerce, investment facilitation, and interim dispute settlement have struggled to achieve major participation or conclusive negotiations.

3. Contentiousness of Plurilateral Agreements (PAs):

• Lack of Representativeness: PAs are contentious because the subset of initiating members is “sometimes considered as not fully representative of the entire WTO membership”.
• Concerns about Power Play: Their “exclusivity… engenders apprehensions of possible power play in agenda-setting and the according of a first-mover advantage in rule-setting to participant nations”.
• Undermining WTO’s Core Principles: This is viewed as undermining the “consensus-based approach of negotiations that is integral to the WTO” and negating the “long struggle of developing countries post-Uruguay Round in establishing development as the avowed objective of the Doha Development Agenda while keeping ‘non-trade’ issues at bay”.

4. The Changing Context of Global Trade (Post-Uruguay Round):

• GVC-led Trade (Inextricable Nexus): The “underlying mechanism of the 21st Century GVC-led global trade needs to be understood as an inextricable nexus between liberalisation of trade in goods, investment and services”. This requires appropriate rules in all three domains.
• “Non-Trade” Issues in FTAs: Issues previously classified as “non-trade” by some economies (including India) and resisted in WTO PA negotiations are “already covered in greater depth in FTAs”. Examples include investment protection, investor-state dispute resolution, intellectual property rights, and ESG-related provisions.
• Bilateral Sector-Specific Agreements: When PA negotiations stall, interested countries opt for “sector-specific bilateral agreements outside of the WTO,” such as US-Japan and Australia-Singapore digital trade agreements (2020), and EU-South Korea digital trade agreement (March 2025).
• Growing Protectionist Unilateralism: The current era is characterized by “growing protectionist unilateralism and trade policy uncertainty,” increasing the “greater need for consistency in global trade rules”.

5. Recommended Way Forward for WTO’s Relevance:

• Redefining Decision-Making for PAs: The article suggests it’s “more appropriate to expend negotiating capital on defining the rules for participation and negotiation in these plurilateral formulations with ‘variable geometry’,” rather than pursuing elusive consensus.
• Alternative Mechanisms for PAs: This could involve:
  • Determining a “threshold share of global trade” for nations initiating a discussion in a PA.
  • A “majority rule to identify issues” for negotiation under a PA.
• Addressing Legality of PA Outcomes in WTO: Simultaneously, efforts should be made to “deal with the issues of legality in including PA-negotiated outcomes as rules in the WTO”.
• Combination of Instruments: To prevent the WTO from being “consigned to the sidelines,” a “combination of alternative instruments — FTAs and PAs — is required”. The latter (“serious cooperative efforts to redefine the decision-making process at the WTO”) is crucial.

In conclusion, the WTO is facing an existential crisis stemming from its outdated consensus-based decision-making and a failure to evolve its rules in line with modern GVC-driven trade. The proliferation and deepening of FTAs, along with the slow progress and contentious nature of PAs, highlight the urgent need for the WTO to reform its negotiating processes. By embracing more flexible, perhaps majority-based, approaches for plurilateral agreements and ensuring their legal integration, the WTO can reassert its relevance and adapt to the complex realities of 21st-century global trade.

Disclaimer

The analyses presented in this article are prepared from reliable news sources, official releases, and subject expert inputs to aid aspirants in understanding important policies and current affairs, and are intended solely for educational and exam preparation purposes; the content reflects interpretations and summaries based on available information at the time of writing and should not be considered as official government statements or notifications, with readers encouraged to verify details with official policy documents, press releases, and notifications issued by the concerned authorities, while any predictions, difficulty assessments, or exam relevance mentioned are indicative estimates only and not guaranteed to appear in examinations.

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