India’s logistics performance index plummets to 47

The capacity of countries to efficiently move goods and connect manufacturers and consumers with international markets is improving around the world, but much more is needed to spur faster economic growth and help firms benefit from trade recovery, says the World Bank

The government has come out with an ambitious plan of adding 20 km of roads/day to improve the abysmal state of road infrastructure in the country. Various port authorities are planning to add a capacity of 1 billion tonnes per annum by 2012. Metros are laying out their mass rapid transit schemes. However, India continues to drop down the scale of logistics performance in a seemingly free fall. Even war-ravaged Lebanon has managed to sport a better logistics performance index (LPI) of 33 compared to this nation’s tired 47th rank.

India has scaled down on the World Bank LPI survey ranking to 47 in 2010 from 39 in 2007. Not only India, a majority of South Asian countries’ LPI ranking amongst 155 countries has been depressing. However, India continues to be the top performer in South Asia.

Germany, Singapore, Sweden, the Netherlands and Luxembourg have emerged as the top five rankers in the LPI survey. In 2007, India ranked 39th on the LPI.

The capacity of countries to efficiently move goods and connect manufacturers and consumers with international markets is improving around the world, but much more is needed to spur faster economic growth and help firms benefit from trade recovery, according to a new World Bank Group survey on trade logistics.

Germany is the top performer among the 155 economies ranked in the Logistics Performance Index (LPI), in the report ‘Connecting to Compete 2010: Trade Logistics in the Global Economy’.

“Economic competitiveness is relentlessly driving countries to strengthen performance, and improving trade logistics is a smart way to deliver more efficiencies, lower costs and spur economic growth,” said World Bank group president Robert B Zoellick.

The report, headed by World Bank economists Jean Francois Arvis and Monica Alina Mustra, notes that among developing economies, logistics performance transcends the level of per capita income. Many countries perform better than what their income levels would suggest. The ten most significant over-performers include China (27), India (47), Uganda (66), Vietnam (53), Thailand (35), the Philippines (44), and South Africa (28).

In terms of how developing countries are doing per region, South Africa (28) is the top performer from Africa; China (27) from East Asia; Poland (30) from Central and Eastern Europe; Brazil (41) from Latin America; Lebanon (33) from the Middle East; and India (47) from South Asia, the survey report said.

Amongst the other South Asian countries, Afghanistan has improved from its 150th ranking in 2007 to the 143rd ranking in 2010. Bhutan continues at rank 128. Nepal’s ranking has dropped from 130 in 2007 to 147 in 2010. Pakistan’s ranking has fallen to 110 in 2010 from 68 in 2007. Sri Lanka’s rankings have also scaled down to 137 in 2010 from 92 in 2007. However, Bangladesh has surprised with an improvement to the 79th position in the LPI rankings in 2010 from the 87th position in 2007.

According to the report, South Asia’s port services are very inefficient, and thus a serious constraint upon unlocking the region’s full potential. Unfortunately, trade facilitation in South Asia has not received the attention it deserves, but it is gaining prominence in policy circles as well as in the popular media.

The World Bank conducts the LPI survey every two years. The report presents the findings of the second edition of ‘Connecting to Compete’, a report on the new dataset for the 2010 Logistics Performance Index (LPI) and its component indicators.
 

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“Service tax is a bit of a dampener for the realty industry”

Sobha Developers Ltd’s managing director JC Sharma discusses the impact of service tax on the realty sector and his company’s roadmap with Moneylife’s Pallabika Ganguly

Pallabika Ganguly (ML): The Union Budget has brought the construction industry under the ambit of service tax. What would be the impact of the service tax charges on the real-estate industry?
JC Sharma (JS):
The prices of properties are likely to go up by more than 3%. The service tax on the under-construction properties and on leased land development will impact the actual users. This is a bit of a dampener for the realty industry.

Every year, after the Budget, there is a price hike in some sectors. People make noises about the same for some time after the change and then accept it as daily routine. The same situation is here also, for a few weeks, there will be tentativeness in the market but it will again turn normal.

Real growth in the economy is the biggest booster. The reduction in direct taxes will give more money in the hands of people. This Budget is a positive one.
 
ML: How do you see the realty market performance over the past 12 months as we near the end of FY10?
JS:
The realty market has seen both side of the coin—boom and bust. In the last couple of quarters, we have clearly seen the confidence coming back both from the customers and developers. We foresee that despite the service tax and increase in input costs due to the excise issue which will impact the industry later, the realty segment will move smoothly.

ML: Sobha Developers is planning to enter into joint development agreements with landowners to expand land banks. What are the merits of such agreements?
JS:
  Going forward, we are looking at such deals. Execution of a project is our strength so the best way to enhance this skill is to tie up with landowners. As a model, instead of putting my money, I leverage on my strength. My focus is to increase the volumes. Few of my existing projects are constructed on such models and we are looking for such joint venture developments in the next quarter.

ML: Your company was talking about entering a segment called ‘value homes’. What is the progress on this front?
JS:
We have plans to enter that segment in a year’s time. I am trying to develop the ‘value home’ segment on the lines of China, Thailand and Mexico. I am still working on the model and have not finalised anything that would work in India.

ML: How much is your total area under construction at present and what are your plans in sales and inventories?
JS:
  Currently we are developing around nine million square feet (sq ft). We will be developing another eight million sq ft over the next financial year. Out of nine million, we are planning to hand over residential projects of about four to five million sq ft over the next 12-15 months.

Out of the total nine million, I have little more than three million to be sold. We had planned to sell one-and-a-half million square feet in FY10. We have already achieved the target and we are almost at a stage of crossing two million square feet of sales rather than the earlier target. For the next financial year, we have plans to sell three million square feet.

ML: During the third quarter to end-December, Sobha Developers posted a 444% higher net profit to Rs40.80 crore on revenues of Rs310.20 crore. How did you achieve it?
JS:
From the last quarter, the realty market started showing signs of revival. A combination of quality products and marketing strategies helped us to achieve the target. The growth can be attributed to revival in economic growth, improved job scenario especially in the IT, auto and textile sectors, coupled with competitive interest rates offered by various banks.

ML: In which segment, high value, mid value or low cost, do you see the demand coming from?
JS:
All kinds of apartments have good demand, whether mid value, high value or low cost housing. I recently came across data, which showed that the middle class is growing at a compounded annual growth rate (CAGR) of 14% and upper middle class at a CAGR of 21%.

ML: What is the growth you are looking at in Q4FY10?
JS:
We do not make forward-looking statements but we are expecting a good growth. Around 10% more growth than the last quarter. I expect sales to take place at the same speed as they are currently going through. There could be some hiccups, but I think they will be absorbed by the market.
 

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