Editorial Notes

[Editorial Notes] Digitizing Trade in India

India has made various interventions that have positively developed the port ecosystem, but there are still some gaps that need to be bridged.
By IASToppers
July 03, 2020

Contents:

  • Introduction
  • Digital journey of India
  • Upgradation, digitisation and automation
  • Gaps to be filled
  • Way Forward
  • Conclusion

Digitizing Trade in India

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Introduction:

Due to the COVID-19 pandemic and related restrictions India’s exports in April 2020 contracted by 60%. There was a 37% fall in the units handled by the Jawaharlal Nehru Port (the largest container port in India) in April 2020 as compared to April 2019. The steep decline in world trade stresses the need for a more digitised trading environment, with minimal manual touch-points.

Digital journey of India:

  • India started its digital journey late compared with the other advanced economies in Asia.
  • Hong Kong commenced its digital drive in 1997, while South Korea launched a prepaid public transportation card in 1996. Digitization was popularised in Japan in 2001, while China started using the QR (Quick Response) code in 2011.
  • India’s digital awareness evolve from 2014 when the government laid down a huge fundamental digital infrastructure under which the country’s 1.2 billion population were given their digital identity called Aadhaar card India.
  • The 12-digit unique identity number based on biometric and demographic data, was connected to their mobile phone, which in turn is connected to their bank account.
  • The second fundamental shift happened in 2016 when the government created the United Payment Interface (UPI), an instant real-time payment system that facilitates inter-bank transactions.
  • This digital revolution, or the fourth industrial revolution, is picking up pace in India in all spheres including trade, finance, exporters, importers and regulators.

Upgradation, digitisation and automation:

  • Globally, digitisation of procedures and lower human intervention are the two major pillars that drive trade across borders.
  • Post India’s ratification of the Trade Facilitation Agreement of the World Trade Organization in April 2016, reforms focused on infrastructural up-gradation, digitisation and automation.
  • Schemes such as Direct Port Entry and Direct Port Delivery, and the Radio Frequency Identification system and Single Window Interface for Facilitating Trade, were all aimed at reducing the time and cost of clearance of goods.
  • The Port Community System was aimed at seamlessly integrating all maritime trade-related stakeholders on a single platform.
  • e-SANCHIT (e-Storage and computerised handling of indirect tax documents) was aimed at reducing human intervention.
  • These interventions and government’s focus on effective logistics and smooth export-import (EXIM) procedures at Indian borders resulted in continuous improvement in India’s Ease of Doing Business ranking, particularly in the ‘trading across borders’ parameter on which it ranked 68 in 2020.
  • With the current crisis, ports across India demand a greater leap in trade facilitation measures to expedite the movement, release and clearance of goods.

Gaps to be filled:

  • There are some gaps in the port ecosystem concerning the standardisation and coordination of processes across ports, and awareness and acceptability of new initiatives among the users.
  • The delays in moving to a paperless trade ecosystem can be attributed to gaps in the effective implementation of digital platforms.
  • The shortcomings in the functionality of the system and technical glitches result in limited use of the system or parallel use of hard copy.
  • For example, the absence of a shipping line delivery order in customs and terminal systems results in the usage of hard copy for cargo movement.
  • The lack of connectivity/message exchanges between different stakeholders’ systems results in delayed cargo clearance.
  • There are many issues concerning training and capacity building amongst the users, restricting the optimal utilisation of digital platforms.
  • With trade volumes contracting and economic indicators shrinking, the present crisis presents an opportunity to develop new systems and enhance existing platforms while at the same time changing the attitude of stakeholders on the ground.

Way Forward:

  • As the countries slowly emerge out of the pandemic, new demand and supply chains will form, that will be located in countries that re-orient their existing trade structures.
  • Different guidelines have been issued by the government in last two months, focusing on measures to facilitate and expedite the clearance process so that it is more automated, online and paperless.
  • While some immediate steps are needed to survive the crisis, it is imperative to work on a permanent road map which addresses some of the gaps highlighted.
  • Enhanced integration of systems and coordination between them should ideally result in the exchange of messages and sharing of input data between them on a real-time basis.
  • Promoting the use of multi-stakeholder single platforms like the Port Community System can streamline EXIM procedures, moving towards a digitally engaged and enhanced trading environment.

Conclusion:

India has made various interventions that have positively developed the port ecosystem, but there are still some gaps that need to be bridged. The efforts will be instrumental towards improving India’s trading ecosystem and achieving the desired target of Ease of Doing Business (ranking under 50) set by the Prime Minister’s Office. The more digitised our trade facilitation infrastructure, the more immune we will be to future disruptions.

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