Five key reforms India needs to boost trade-related infrastructure and enhance export competitiveness

The National Committee on Trade Facilitation (NCTF) has just released the National Trade Facilitation Action Plan (NTFAP) 3.0 (2024-2027). The endeavour is to “reduce logistics costs and boost export competitiveness for becoming Aatmanirbhar Bharat and achieving the goal of becoming a $5-trillion economy within five years, aligning with the Vision of Viksit Bharat @ 2047.”

Highlighting India’s stellar performance on key global indices, particularly the UN Global Survey on Digital and Sustainable Trade Facilitation, where India’s overall trade facilitation implementation score has improved from 78.49% in 2019 to 93.55% in 2023, the NTFAP 3.0 envisions an even more modernised cross-border clearance ecosystem through TFA Plus commitments.

With a focus on “coordinated, digitised, seamless, efficient, transparent, risk-based, and technology-driven processes” supported by cutting-edge infrastructure, the new policy document provides a framework to implement the next generation of reforms that includes four thrust areas: ease of compliance; enhancing EXIM efficiency through collaboration; sustainability, inclusion, and resilience; and infrastructure upgradation.

So far, so good. The emphasis on extending the digitalisation drive, technology-driven and automated infrastructure, inter-agency coordination, and trust-based compliance, etc., through the 48 action points will, however, need to be backed with effective implementation.

Five suggestions in this regard:
First, it is essential to resolve the long-standing issues that have persisted over the years. One notable challenge is the lack of uniformity in customs practices across various customs locations in different states, which has led to an unpredictable environment for trade. These inconsistencies may stem from a range of factors, including variations in local governance, differing interpretations of national regulations, and region-specific tax incentives. Regardless of the root causes, it is crucial to address these barriers to foster a more seamless and predictable trade landscape that would ultimately benefit businesses and economic growth.

Second, the National Committee on Trade Facilitation needs to expand its membership; it was set up in 2016 to play the lead role in developing the pan-India road map for trade facilitation. With newer trade issues such as e-commerce, supply chain resilience, and sustainable trade becoming part of the core agenda for reforming trade facilitation, the relevant government agencies and trade bodies need to be included as members.

Third, keep the focus on the ‘user.’ Indeed, the effort of all PGAs should be on proactively receiving feedback at all policy stages, including design, implementation, and impact assessment from the private sector stakeholders. The mantra of consulting early, widely, and often has become essential, distinguishing itself from periodic mechanisms in the context of infrastructure creation and the streamlining of processes. A strong consultative mechanism is the most effective way to resolve users' challenges. In fact, the consultative mechanism should in itself be an inclusive process.

Fourth, women should be considered as a distinct stakeholder group in the consultative process. The new NTFAP carries over the distinct focus on gender and trade from the previous plan and calls for enhancing women and youth participation in the EXIM trade ecosystem. The key performance indicators listed are: increase in the share of women in governing positions in trade bodies; enhanced representation of women in key trade bodies; sensitisation and awareness through outreach programmes and workshops for women stakeholders; and upgrading of facilities, such as restrooms, bathrooms, crèches, etc., at ports to foster a more inclusive working environment. A more proactive approach would be to adopt a gender mainstreaming strategy across all the thrust areas that works to understand and address the specific impediments faced by women. Measures such as onboarding more women in the Authorised Economic Operator (AEO) programme, collection of gender-disaggregated data, women-specific trade finance products, and training programmes for women in the freight logistics sector can play a catalysing role in enhancing women’s participation in the trade ecosystem.

Finally, in tandem with the upgradation of hard and soft infrastructure and enhanced inter-modal connectivity at the borderland ports, greater cross-border coordination and cooperation are necessary. In addition to traditional customs-to-customs cooperation, such as advance information sharing and mutual recognition agreements (MRAs), forming cross-border working groups and expanding capacity-building efforts to include a wider range of border agencies, such as the land ports authorities, would lead to the resolution of border bottlenecks more effectively. Similarly, building mirror infrastructure on both sides of border points shared by India and its neighbouring countries can play a critical role in improving trade efficiency. In fact, trade facilitation infrastructure and capacity-building measures should be integrated into India’s broader strategy for providing development assistance to other countries. With the government recently increasing the allocation for international development projects by 20% in the latest Union Budget, there is an opportunity to use this funding to support the development of trade-related infrastructure in partner countries.

Nisha Taneja is professor, and Sanjana Joshi is Senior Fellow at ICRIER, New Delhi. Authors’ views are personal.